Purpose Duration Hedged Real Estate Fund August Commentary

Fund Highlights

  • The Fund ended the month in the red as REITs were under selling pressure. Specialized, retail and diversified REITs were the worst performing sectors, while residential REITs were positive.
  • REIT spreads to U.S. credit have tightened over the past few years as REITs become primarily yield plays. Although the market was highly negative this month, the yield characteristic provides REITs with some downside protection. Canadian REITs outperformed their U.S. counterparts this month; however U.S. REITs have outperformed year to date.
  • The Fund had no interest rate hedge this month.
  • This month the CAD depreciated slightly against the USD providing tail-wind for the non-hedged long USD exposure of the Fund.
  • The Fund continued to hedge USD currency exposure maintaining a net USD exposure at approximately 7% of the Fund’s NAV.

Market Commentary

Markets experienced a tumultuous decline this month as concerns over a slowdown in global growth and persistent worries over deflation triggered a dramatic fall in global equity prices. The S&P sank 6%, the SPTSX fell over 4% and the VIX fear gauge spiked to levels not seen since the crisis back in 2009. China was in the headlines as worsening economic data and a volatile stock market decline proved unnerving to investors. A surprise devaluation in the Chinese yuan shocked markets and provoked suspicions that the world’s second largest economy was in more distress than official figures might suggest. In the U.S, GDP surprised to the upside with a growth rate of 3.7%, however mixed messages from various Fed officials caused uncertainty as to the timing of potential interest rate hikes. Crude oil was extremely volatile, initially falling below $40 before spiking 25% in 3 days after OPEC suggested that they might be willing to discuss achieving “fair prices.” Currencies were mixed with most commodity and emerging currencies continuing to struggle vs the U.S dollar. CAD weakened off to new lows on the year, while euro and yen managed to rally.

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