Purpose Duration Hedged Real Estate Fund January 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 posted solid gains in January. Global bond yields fell this month as central banks increased accommodative policies to fend off deflationary pressures. The Bank of Canada was no different as a surprise rate cut sent Canadian yields to all-time lows and caused the loonie to plunge 8.7%. As a result, investors sought out higher yields which buoyed the REIT space. All sectors were positive with the strongest performance coming from specialized, retail and diversified REITS.

The best performing stocks in the portfolio were Hospitality Properties, Correction Corp and Home Properties. The worst performers were Mid-America Apartment, Select Income and Riocan.

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

Market Commentary

Markets were volatile this month as central bank activity dominated most of the headlines. Deflation worries spurred the ECB to initiate a Euro 1.1 trillion stimulus package targeting the purchase of sovereign debt. The Bank of Canada shocked the market with a 25 bp rate cut citing recent weak economic data and concern over the negative effect of plummeting oil prices. The Swiss national bank roiled financial markets when it removed its long held peg versus the euro triggering a historic 20% move higher in the Swiss franc. This month European equity markets were the strongest performers on the back of the ECB action. U.S. markets ended down 3% and the S&P/TSX closed slightly positive. Commodities continued to experience weakness this month. The energy sell off extended lower as crude fell another 10%. Copper fell 13% to 5 year lows on declining demand and worse than expected economic data in China. Precious metals bucked the trend as gold rallied on safe haven flows. Currency markets were extremely volatile this month as central banks drove large moves. The dollar continued to see strength versus the Euro and other commodity currencies. Canada was the worst performing G10 currency falling 8.7% after the BOC’s surprise rate cut.

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