Purpose Diversified Real Asset Fund January Commentary

Fund Highlights

  • Tough month for real assets as the global commodities rout continued on further indicated weakness of the Chinese economy.
  • Save haven inflows into assets such as gold and silver propped up the precious metals sleeve and energy based assets were able to gain on Tourmaline which showed relatively strong results and continues to invest in growth opportunities.
  • Base metals, agriculture equities and commodities were losers this month; Hudbay Minerals and First Quantum declined in excess of -40% in January.
  • The Fund increased cash allocation on a risk parity basis as real assets continue to tumble in a disciplined approach to manage returns..
  • 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
2016 had a tumultuous start as markets sold off in one of the worst January performances on record. China was a catalyst as markets became unnerved by the rapid devaluation of the yuan which potentially signalled a slowdown in world’s growth engine. Oil sold off to new cycle lows touching $26 which put further pressure on commodity producing nations and exacerbated concerns of global deflation. After the Fed move in December, the market digested the prospect of another series of hikes which led to further uncertainty. Safe haven assets saw inflows as US 10yr yields sank below 2% and gold rallied 5%.

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