Purpose Duration Hedged Real Estate Fund July Commentary

Fund Highlights

  • The Fund was positive in July as U.S. REITs performance bounced back from the previous month and were the main catalyst of the Fund returns while the Canadian names underperformed.
  • The best performing sectors were specialized, residential, and retail while commerical was the only sector finishing negative. Mack-Cali Realty Corp, Mid-America Apt and GEO Group were the best performing names with double digit returns for the month.
  • The portfolio had its regular quarterly rebalance in July with 3 Canadian and 4 U.S. holdings being replaced and the Fund maintained 50/50 exposure to U.S. and Canada.
  • This month the non-hedged long USD exposure was a tailwind as CAD declined over 5% against the US dollar.
  • The Fund continued to hedge USD currency exposure and took the opportunity to reduce USD exposure from approximately 10% to 7% of the Fund’s NAV.
  • The Fund had no interest rate hedge this month.

Market Commentary

In July, global stocks ended higher with strength in the U.S and Europe contrasted by weakness in Canada and China. The Greece overhang was temporarily resolved as Greece voted “yes” to more austerity and in return the ECB provided a bridge loan to tide debtors over until a 3rd bailout could be negotiated. In the U.S jobs data was slightly softer, nonetheless the Fed retained faintly hawkish overtones in its statement preparing the market for the possibility of a rate hike into the end of the year. In Canada, sluggish economic data and falling energy prices prompted the BOC to unexpectedly cut interest rates for a second time this year. Poloz went on to suggest that there were more tools at his disposable to fend off a potential recession.
Commodities ended lower this month. The announcement of a historic U.S backed nuclear deal with Iran caused crude to plummet in anticipation of more Iranian oil coming online. Inventory builds and weakening demand exacerbated the move lower as WTI closed below $50 for the first time in months. Gold plummeted to new multi-year lows as geopolitical fears over Greece waned and the dollar strengthened. Grains also reversed course as prices stabilized after experiencing heavy short covering the previous month.
Currency markets continued to see volatility. The U.S dollar saw broad strength after the Fed indicated a possible rate hike by year end. CAD was one of the worst performers this month falling over 5%.

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