Tuesday November 12th, 2013
Markets covered wide ranges in October, driven by a high level of activity from central banks globally. Investors have been seeking yield after the September FOMC announcement when the Federal Reserve did not begin tapering their bond purchasing program. The primary events in October which drove equity markets were the appointment of Janet Yellen as Ben Bernanke’s successor, the government shutdown, and the potential of the U.S. defaulting on its debt. All these events were resolved, with the government shutdown ending, a delay in decisions regarding the debt ceiling to early next year and a general sigh of relief as markets assessed that that Yellen would be a dovish central banker. This motivated yield seeking investors to rally equities and high yield debt. We see this continuing into Yellen’s Senate confirmation in November.
The Purpose Diversified Real Asset Fund appreciated through the month of October. The Fund’s exposure to real assets saw upside from Base Metals, Real Estate and Agriculture while Energy and Precious Metals declined. In spite of the non-inflationary environment, the Fund’s NAV has increased, though appreciation of dividend paying equities. However, exposure to Gold and Silver equities underperformed as they continue to see severe selling as commodities decline and miners are challenged to adjust costs to offset their declining margins. The Fund’s risk-balanced portfolio construction constrained exposure to this underperforming sector. The Fund owns about 13% in commodity futures, which all declined during the month. The best performing commodity in the month was Copper, down only 0.7%, and the worst performing commodity was Crude Oil, down 5.4%.