Purpose Duration Hedged Real Estate Fund January Commentary

Fund Highlights

  • Real estate performance closely mirrored the broad market in January but the Fund was able to comfortably outperform its benchmark on security selection.
  • Safe haven assets saw inflows as U.S. 10Yr yields sank below 2%. Real estate held up well on its dividend driven mandate but not as well as other counter-cyclical assets.
  • Residential and specialized REITs were the best performing sub-sectors, while diversified REITs, particularly those based around hotels and resorts suffered.
  • U.S. REIT selection slightly underperformed the Canadian part of the portfolio but fared much better than the real estate sector, which returned -4.58% in January (S&P 500 Real Estate TR).
  • The Fund completed a quarterly rebalance this month replacing 4 securities, three listed in the U.S. and one in Canada.
  • 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
2016 had a tumultuous start as markets sold off in one of the worst January performances on record. China was a catalyst as markets became unnerved by the rapid devaluation of the yuan which potentially signalled a slowdown in world’s growth engine. Oil sold off to new cycle lows touching $26 which put further pressure on commodity producing nations and exacerbated concerns of global deflation. After the Fed move in December, the market digested the prospect of another series of hikes which led to further uncertainty. Safe haven assets saw inflows as US 10yr yields sank below 2% and gold rallied 5%.

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