Purpose Duration Hedged Real Estate Fund February Commentary

Fund Commentary

The Fund seeks to provide shareholders with long-term capital appreciation by investing in a portfolio of real estate focused equities listed in North America. The Fund may reduce the risk of rising interest rates associated with real estate equity securities by tactically hedging the duration of the portfolio.

The Fund was negative this month. After sinking lower in January, U.S. 10 year yields traded back higher above 2% in February. Safe haven flows into bonds reversed sharply on the back of waning geopolitical tensions, and a positive outlook for the U.S. economy that increased the probability of a June rate hike. As a result, interest rate sensitive sectors were negatively impacted. This month the best performing REIT sectors were office, industrial and healthcare, while the worst were residential, retail and hotel & resort.

The best performing stocks in the Fund were Brookfield Canada Office Pro, Dundee International and Cominar. The worst performers were Mid-America Apartment, Hospitality Properties and Rayonier.

The Fund hedges its USD currency exposure, maintaining a net USD exposure of approximately 10% of the Fund’s NAV.

Market Commentary

Markets rebounded higher in February with dip buyers emerging on waning geopolitical concerns and optimism on the global growth outlook. Concerns over Greece’s ability to meet its fiscal pledges receded as bailout provisions were extended by the ECB. Generally positive U.S. earnings, strong jobs data and supportive Fed comments helped the S&P close up 5.7% on the month. European equities outperformed other developed markets as inflows increased on the back of the ECB’s supportive actions from the previous month. U.S. 10 year yields squeezed quickly back above 2% as safe haven demand declined, and the market began to price in a higher probability of a June rate hike.
In commodities, oil managed to recover off the lows with prices buoyed by news of cuts in production and the potential for supply disruption in the Middle East. Gold gave back its January gains retreating lower as safe haven demand declined.
The U.S. dollar continued to exhibit selective signs of strength notably against Japanese yen, Swiss Franc and emerging market currencies. CAD was able to recover higher buoyed by signs of oil recovery and better than expected trade deficit numbers. However, the BOC’s recent dovish comments continued to provide an overhang on the loonie with further rate cuts expected in the coming months.

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