Purpose Duration Hedged Real Estate Fund April 2016 Commentary

Fund Highlights

  • Real estate had a mixed month on either side of the border with the U.S. benchmark down -2.2% and the Canadian real estate benchmark up +2.4%. The Fund performed on expectations, right in the middle of this group.
  • An activist hedge Fund group (Land & Buildings) launched a campaign betting against Investors Real Estate Trust, which fell -12% after the news; this campaign detracted from Fund performance.
  • With positive macro-economic data coming out the U.S. in April, the defensive nature of the real estate play went out of favour but is outperforming the broad index year-to-date.
  • Residential REITs were the best performers this month whereas Specialized REITs performed the worst.
  • The Fund did not implement a duration hedge in the month of April.
  • 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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