Purpose Enhanced US Equity Fund April 2016 Commentary

Fund Highlights

  • Value continues on upward momentum with the Russell 1000 Value Index up 2.1% for the month compared to the Russell 1000 Growth Index down -0.9%.
  • The Fund’s value factor exposure helped the Fund gain on the upside as did the exposure to rebounding energy and commodity prices.
  • With a forward P/E ratio of 11.35x, the Fund is focused on deep value holdings in mid-caps; these characteristics are poised to perform well in the coming year as earnings decelerate and probability of rising interest rates increases (cheap money fades away).
  • The portfolio’s equal weight characteristic helped the Fund capitalize on surging energy and commodity prices.
  • With respect to the currency-hedged shares, 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
Global markets grinded higher in April with Canadian and European equities outperforming the US. Although the IMF warned of further downside risks to growth, global economic data was largely positive this month spurring hopes for reflation. Manufacturing was stronger than expected while US payroll numbers continued to see strength. Canada surprised to the topside as retail sales and GDP figures came in better than expected. There was considerable focus on the energy meeting at Doha, however, no substantial agreement was reached on production cuts. Nonetheless, crude managed to rally almost 20% on lower inventories and a better growth outlook. Commodity cyclical and EM currencies saw significant strength vs the US dollar. The loonie rallied over 3.5% as the prospect of another BOC rate cut seeming to fade. The strength in the yen was a major focus signifying that the BOJ may have reached the limits of its monetary policy. Bonds in the US and Canada sold off from the highs, while corporate credit continued to tighten.

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