Purpose International Tactical Hedged Equity Fund August Commentary

Fund Highlights

  • The Fund was negative in August as global equity markets experienced a tumultuous decline due to concerns over a slowdown in global growth and persistent worries over deflation. China was in the headlines as worsening economic data and a volatile stock market decline proved unnerving to investors.
  • This month all countries were negative, led by holdings in Japan and Asia Developed (ex-Japan) names. The worst performing sectors were Financials, Materials and Consumer Discretionary.
  • The Fund’s exposure to Britain and Asia Developed (ex-Japan) are heavily hedged, which helped soften the negative impact from plunging equity prices.
  • The Fund increased short index futures hedges and decreased net market exposure to ~58% of Fund’s NAV from ~62% at the beginning of the month.

Market Commentary

Markets experienced a tumultuous decline this month as concerns over a slowdown in global growth and persistent worries over deflation triggered a dramatic fall in global equity prices. The S&P sank 6%, the SPTSX fell over 4% and the VIX fear gauge spiked to levels not seen since the crisis back in 2009. China was in the headlines as worsening economic data and a volatile stock market decline proved unnerving to investors. A surprise devaluation in the Chinese yuan shocked markets and provoked suspicions that the world’s second largest economy was in more distress than official figures might suggest. In the U.S, GDP surprised to the upside with a growth rate of 3.7%, however mixed messages from various Fed officials caused uncertainty as to the timing of potential interest rate hikes. Crude oil was extremely volatile, initially falling below $40 before spiking 25% in 3 days after OPEC suggested that they might be willing to discuss achieving “fair prices.” Currencies were mixed with most commodity and emerging currencies continuing to struggle vs the U.S dollar. CAD weakened off to new lows on the year, while euro and yen managed to rally.

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