Purpose Duration Hedged Real Estate Fund February Commentary

Fund Highlights

  • The Fund was positive for the month despite a weak U.S. REIT market as Canadian holdings provided much of the momentum.
  • U.S. REITs declined as the Fed reiterated its stance on a gradual liftoff for 2016 after better than expected GDP and jobs growth numbers hit the market.
  • Canadian REITs were highly accretive to the Fund as markets priced in a longer than expected period of low interest rates.
  • Dream Office REIT (Cad) rallied most in the last seven years as it announced a goal to sell non-core assets by 2018. Columbia Property Trust (U.S.) was the largest detractor this month.
  • 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
Markets tested lower early in February driven by heightened risk aversion. Risk assets have seen a strong correlation with oil in recent months as WTI sank to multiyear lows. However, as things looked bleakest, sentiment seemed to shift after rumours emerged that the largest oil producing nations were intent on meeting in March to discuss possible production cuts. Crude rallied over 30% off the lows which had a positive transmission effect across equity and high yield markets. Canadian equities outperformed as cyclical sectors saw a sizeable bounce. Talks of increased fiscal stimulus and a waning need for further rate cuts helped the loonie recover over 3%. US GDP and jobs growth was better than expected, and the Fed reiterated its outlook for a gradual liftoff in 2016. Europe still produced sluggish IP and PMI’s, while the threat of a UK Brexit was a further overhang for the Eurozone.

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