Purpose Investment Principles

At Purpose, our strategies are distinct from other investment funds in their design and objectives. When we construct our fund strategies, Purpose uses a set of key tenants and factors that are rooted in empirical and academic research and have proven through many decades to provide value. We are extremely disciplined around these tenants, which allows us to deliver great products for our investors. Here we explain what these factors mean to us, and which of Purpose’s funds include them in their investment design.

  • Academic Research

    We base our investment strategies on extensive empirical research. Our investment strategies are grounded in economic theory and are rigourously tested. We aggregate unique data sets on thousands of stocks around the world and use deep fundamental analysis of these securities.

  • Quality

    We believe that companies that have higher quality and strong fundamental trends tend to outperform companies that are lower quality and have negative fundamental trends in their business over time. We score a company’s quality using nine fundamental trends including: profitability, positive trends in return on assets, positive trend in profitability, increasing liquidity ratio, declining debt outstanding and declining shares outstanding.

    Funds That Utilize This Factor in Their Investment Strategy:

  • Value

    We believe that companies that are less expensive tend to outperform companies that are relatively more expensive over time. We use key valuation factors including: cash flow yield, sales yield, EBITDA/enterprise value, forward revenue yield, etc. to select and weight companies that are attractively valued.

    Funds That Utilize This Factor in Their Investment Strategy:

  • Risk Parity

    When we include multiple assets in a balanced strategy, we use an asset allocation methodology known as “risk parity.” Risk parity seeks to balance the risk contribution of each asset class such that each asset class has an equal contribution to total risk of the portfolio. This approach allows for the creation of a portfolio with a targeted risk level (volatility) and over time, we believe, this allows us to manage and control risk better for a fund.

    Funds That Utilize This Factor in Their Investment Strategy:

  • Tax-Efficient

    We believe taxes are a critical part of long-term wealth compounding. Many of our funds are based on a tax-efficient corporate class structure which results in all distributions being characterized as either Canadian eligible dividends, capital gains and/or return of capital for tax purposes. Investors also benefit from the ability to switch between funds within the corporate class structure on a tax-deferred basis.

    Funds That Utilize This Factor in Their Investment Strategy:

  • Equal Weight

    We believe that once we select our final list of securities, equally weighting those securities is the best way to allocate the portfolio. This gives each security an equal opportunity to provide a return while reducing the negative impact any one security has on the portfolio.

    Funds That Utilize This Factor in Their Investment Strategy:

  • Sector Diversification

    We believe that sector diversification is just as important as security diversification. Through our portfolio construction, we employ a disciplined approach that forces us to give each sector an equal opportunity to be represented in our portfolios. Over time, this discipline allows our funds to manage more smoothly through different economic environments.

    Funds That Utilize This Factor in Their Investment Strategy:

  • Diversification

    We believe diversification helps investors reduce the overall risk of their portfolios without sacrificing expected return. Accordingly, in many of our strategies we seek to invest across different securities within each asset class, and across many different asset classes and sectors.

    Funds That Utilize This Factor in Their Investment Strategy:

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