Purpose Diversified Real Asset Fund February Commentary

Fund Highlights

  • With safe assets coming back into favour this month, gold rallied ~10% and had a direct impact as the Fund climbed in excess of 4.6%.
  • The materials complex rallied back with many holdings correcting in excess of +20%. The Fund experienced positive gains in all sleeves other than energy. Metals and commodities were the best performing sleeves this month.
  • Rising commodities prices and strong earnings drove Teck Resources and First Quantum Minerals into high double digit growth while expectation of higher interest rates negatively impacted Mack-Cali and Mid-America Apartment REITs.
  • In commodities, sugar was the best performing trade as it experienced the largest single day price rally in 2 decades on expected declines in production in Southeast Asia due to dry weather brought by El Nino. Cotton was the largest detractor among commodities as slowing demand contributed to a drop in prices.
  • The Fund completed a quarterly rebalance removing 10 securities and adding back 7. In commodities, the Fund removed 1 and added 2 securities.
  • 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
Markets tested lower early in February driven by heightened risk aversion. Risk assets have seen a strong correlation with oil in recent months as WTI sank to multiyear lows. However, as things looked bleakest, sentiment seemed to shift after rumours emerged that the largest oil producing nations were intent on meeting in March to discuss possible production cuts. Crude rallied over 30% off the lows which had a positive transmission effect across equity and high yield markets. Canadian equities outperformed as cyclical sectors saw a sizeable bounce. Talks of increased fiscal stimulus and a waning need for further rate cuts helped the loonie recover over 3%. US GDP and jobs growth was better than expected, and the Fed reiterated its outlook for a gradual liftoff in 2016. Europe still produced sluggish IP and PMI’s, while the threat of a UK Brexit was a further overhang for the Eurozone.

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