Purpose Diversified Real Asset Fund April 2016 Commentary

Fund Highlights

  • After a rough open to the year, real assets have rebounded strongly as positive economic data points towards increasing global consumptions of energy and raw materials. WTI crude oil is up +24% for the year, gold +22% and silver +28%.
  • Base metals were the best performing holdings this month as materials rallied and commodities also contributed to Fund performance. Most commodity holding positions were agricultural in nature.
  • After performing strongly last month, real estate valuations corrected as positive economic data increased investor concerns over rate increases by the U.S. Fed in the coming months.
  • In a scheduled commodity rebalance, the Fund lowered the number of commodity positions to five, removing Lean Hogs Futures from the portfolio.
  • The Fund continued to hedge U.S. dollar currency exposure maintaining a net U.S. dollar exposure of approximately 7% of the Fund’s NAV.

Market Commentary
Global markets grinded higher in April with Canadian and European equities outperforming the US. Although the IMF warned of further downside risks to growth, global economic data was largely positive this month spurring hopes for reflation. Manufacturing was stronger than expected while US payroll numbers continued to see strength. Canada surprised to the topside as retail sales and GDP figures came in better than expected. There was considerable focus on the energy meeting at Doha, however, no substantial agreement was reached on production cuts. Nonetheless, crude managed to rally almost 20% on lower inventories and a better growth outlook. Commodity cyclical and EM currencies saw significant strength vs the US dollar. The loonie rallied over 3.5% as the prospect of another BOC rate cut seeming to fade. The strength in the yen was a major focus signifying that the BOJ may have reached the limits of its monetary policy. Bonds in the US and Canada sold off from the highs, while corporate credit continued to tighten.

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