Purpose Duration Hedged Real Estate Fund November Commentary

Purpose Duration Hedged Real Estate Fund November Commentary

Fund Highlights

  • The Fund was negative for November as markets consolidated after experiencing heightened volatility over the last 3 months.
  • In the U.S., payroll data came in stronger than expected which fueled market expectations for a December rate hike. Despite the prospect for higher rates, the yield curve flattened as the Fed signaled a “dovish hike” and a gradual rise through 2016.
  • Commercial and diversified REIT sectors performed best while specialized REITs were the worst performer with holdings such as Corrections Corp of America and GEO Group experiencing significant declines.
  • Canadian REITs provided most of the downside to the Fund, with Dream Office and Boardwalk suffering significantly.
  • The Fund continued to hedge U.S. dollar currency exposure maintaining a net U.S. dollar exposure at approximately 7% of the Fund’s NAV.
  • The Fund had no interest rate hedge this month.

Market Commentary

Markets consolidated after experiencing heightened volatility over the last 3 months. The terror attack in Paris and the U.S. Thanksgiving holiday gave markets time for pause, especially ahead of an event filled December where the FOMC, ECB and OPEC all have significant meetings to close out the year. In the U.S., payroll data came in stronger than expected which fueled market expectations for a December rate hike. Despite the prospect for higher rates, the yield curve flattened as the Fed signaled a “dovish hike” and a gradual rise through 2016. Canada saw sluggish economic data as cyclical sectors continued to experience a gloomy outlook with no imminent signs of easing. Commodities faced further weakness as crude and copper fell over 10% for the month. In currencies, the loonie fell 2% as the U.S. saw broad strength. European equities outperformed while the Euro sold off near the lows of the year, as markets anticipated further dovish measures from the ECB.

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