Purpose International Tactical Hedged Equity Fund January Commentary

Fund Highlights

  • A tough start to the year for global markets as January experienced a deep equity sell-off rooted once again in China’s troubled economics. The rapid devaluation of the Yuan was a signal of further slowdown in the world’s growth engine as the Hang Seng Index declined in excess of -10% in January, following a -7% decline in 2015.
  • German capital markets resilience also faded as the DAX lost -9%, paring back all the gains of 2015.
  • Long equity contribution to the Fund was negative but was effectively offset by a large short equity futures position, which practically halved experienced losses.
  • Through January, the Fund was almost fully hedged (50% of exposure) in all regions except Australia. Net equity exposure at the end of the month was ~42%, down from 57% at the start of the year.
  • The Fund completed a quarterly rebalance in January replacing five securities; two in Australia, and one each from Asia Developed, Britain, and Japan.

Market Commentary
2016 had a tumultuous start as markets sold off in one of the worst January performances on record. China was a catalyst as markets became unnerved by the rapid devaluation of the yuan which potentially signalled a slowdown in world’s growth engine. Oil sold off to new cycle lows touching $26 which put further pressure on commodity producing nations and exacerbated concerns of global deflation. After the Fed move in December, the market digested the prospect of another series of hikes which led to further uncertainty. Safe haven assets saw inflows as US 10yr yields sank below 2% and gold rallied 5%.

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