Purpose Enhanced US Equity Fund October Commentary

Fund Commentary

The Fund aims to provide returns in excess of broad U.S. equity markets by investing in a portfolio of fundamentally selected U.S. listed equities. The Fund employs leverage to increase its long portfolio exposure and hedges the increased market risk associated with the leveraged portion of the portfolio with index futures.

The Fund was launched this month and was positive in October with all sectors seeing gains. The best performing sectors were healthcare, industrials and materials while telcoms finished flat.

The best performing stocks were Domtar, Whirlpool and Textron. Domtar spiked higher on better than expected earnings, and on comments by the company potentially looking to convert to an MLP structure. Whirlpool rallied higher, despite slightly missing earnings estimates. Management reiterated its operating guidance and was upbeat on the North American sales cycle. The company also completed its 51% acquisition of China’s Hefei Sanyo which was viewed as a positive. Textron surged higher after easily surpassing earnings expectations. Q3 profit rose 61% and the company boosted its full year earnings forecast to reflect strength in its aviation unit.

The worst performers were IBM, Freeport-McMoRan and Pilgrim’s Pride. IBM missed Q3 earnings by a wide margin, cut its outlook and withdrew its $20 EPS for 2015. Freeport-McMoRan fell after seeing a 32% drop in its quarterly profits. Copper production declined out of its Indonesian mine, while gold sales actually rose but this was offset by a decline in overall gold prices. Pilgrim’s Pride was caught in a sell-off alongside competitor Sanderson Farms after comments from Sanderson calling for lower chicken breast prices into year end.

The Fund is levered by approximately 21% and has an offsetting short futures hedge of approximately 21%.
The Fund hedged its USD currency exposure, maintaining a net USD exposure at approximately 10% of the Fund’s NAV.

Market Commentary

October was a bit of a roller coaster ride as markets sold off heavily in the first half of the month before bouncing back rapidly in the second half. Stock markets were initially dragged lower on fears of global slowdown as the IMF cut the global growth outlook while poor European economic data pointed towards a shaky recovery. Cyclical commodity sectors were hit hardest with energy and materials leading the sell-off. However, momentum shifted mid-month as the beginning of the ECB’s bond buying stimulus program combined with dovish Fed comments seemed to turn around the negative sentiment. Expectations of solid U.S. corporate earnings coupled with a strong GDP print helped drive a rebound in stocks. To close out the month, the Bank of Japan unexpectedly boosted its own stimulus measures accelerating purchases of bonds and domestic stocks, which gave a further lift to global markets.

This month commodities performance was mixed. The energy complex continued to see downward pressure from supply overhang. Gold broke lower as safe haven trades were exited and the dollar rallied. Grains bucked the trend and saw a squeeze higher on concerns that poor weather would negatively affect the harvest.

The U.S. dollar saw some initial weakness in October before rallying back later to close out the month strong. The loonie ended slightly weaker versus the dollar at 1.1260.

Return to Post Listing

Fields marked with an * are requiredLES CHAMPS MARQUÉS D'UN * SONT OBLIGATOIRES
Fields marked with an * are requiredLES CHAMPS MARQUÉS D'UN * SONT OBLIGATOIRES