Purpose Diversified Real Asset Fund June Commentary

Market Commentary

The month of June saw a continuation of the equity markets rallying to new highs as central governments reaffirmed their commitment to low rates for a prolonged period of time. Geopolitical concerns in Iraq and the U.S. stance on crude oil exports caused volatility in the energy sector but had little effect on the general equity markets. Volatility continued to sink to multi-year lows across most major asset classes.

The U.S. continued to see improving employment, ISM and PMI, which pointed towards a recovery back to pre-financial crisis levels. Chinese data showed some improvement which served as a reaffirmation of a recovery from pre-financial crisis levels. The ECB launched additional easing in June where they instituted negative rates for the first time in their Deposit Facility and maintained policy to target deflation in the area.

In commodities, energy and precious metals gained while agriculture and base metals declined. Specifically, gold and silver gained as investors rushed back into safe haven investments after renewed conflict in Iraq and the prolonged outlook for a low rate environment. Oil was also up as both WTI and Brent spiked following supply disruption in the Middle East resulting from escalating Middle East tensions.

The Canadian dollar strengthened against the U.S. dollar. The U.S. dollar ended the month at six month lows at levels around 1.06. Previous forecasts had called for a 1.15 U.S. dollar, but the current strength in the Canadian dollar can be attributed to higher WTI oil, and a better than expected May CPI report in Canada, which showed 2% plus inflation for the first time in 2 years. This pointed towards rising inflation in Canada, but did not shake the BoC’s general view of a prolonged low inflation environment. They attributed the 2% plus move to a spike in energy costs which is not indicative of core inflation, and kept rates at 1%.

Fund Commentary

The Fund holds a risk-balanced portfolio diversified across agriculture, energy, base metals, precious metals, and real estate.

The Fund was up during the month of June as its exposure to precious metals and energy gained from a rally in gold, silver and oil, while its exposure to dividend paying equities, base metals and agriculture underperformed.

The best performing commodities for the month were gold, silver and crude oil. Gold and silver benefitted from safe haven inflows due to renewed violence in the Middle East and inflation fears from the ECB. WTI and Brent crude spiked on the Iraq turmoil; which engulfed the Kurdish oil region as well as key pipelines and refineries in the region.

The worst performing commodities were corn, soy and copper. Corn declined right after USDAs WASDE report showed a 9% increase in corn acreage, a potential bumper crop for 2014/15 which mulled prior concerns of a weak crop from flooding from heavy rainfall and hail storms in a few regions. Soy declined in June as Chinese trade imports showed a decline in Soy. Copper also declined in June as there were reports about Chinese warehouses over reporting inventories used for loan collateral.

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