Purpose Duration Hedged Real Estate Fund May 2016 Commentary

Fund Highlights

  • The Fund had a strong month beating both its Canadian and U.S. benchmarks this month. Real estate was positive in both regions with the S&P500 Real Estate Index up +1.59% and the S&P/TSX Capped REIT Index up +0.94% for the month.
  • Specialized REITs were the best performers this month including Corrections Corp of America and Senior Housing Properties Trust, whereas retails REITs were the only negative sub-sector.
  • CB&L Associates based out of the U.S. was the target of a class-action law-suit in May alleging misrepresentation in four financing deals carried out from 2011 to 2013. This news impacted the stock negatively – down 17.6% for the month.
  • The Fund did not implement a duration hedge in the month of May.
  • 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 ended higher this month on the back of general positive sentiment. Despite numerous macro overhangs, such as possible Fed rate hikes, a weaker yuan and an impending Brexit vote markets continued to climb the wall of worry. US data was better than expected across manufacturing, retail sales and jobs which bolstered calls for a rate hike by July. Canadian GDP and trade data were worse than expected, with the negative effects of the Alberta fires yet to filter into the data. The divergent economic pictures caused the loonie to sell off 4% on the month. Commodities continued to grind higher with crude finding comfort near $50. Investment grade credit and high yield remained in the sweet spot for investors wanting to own risk while also earning an attractive yield.

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