Purpose Monthly Income Fund April 2016 Commentary

Fund Highlights

  • Up +2.2% for the month, the Fund gained positive contributions from the fixed income and real asset sleeves of the portfolio while dividend equities detracted from performance.
  • In fixed income, largely positive macro variables led to tighter credit spreads in North America which helped high yield and investment grade bonds rally. The high allocation to these sectors was a big positive for the Fund.
  • Real assets boosted Fund performance and energy and commodity prices rallied on better than expected economic data inferring a macro pickup for 2016. Crude oil prices were up ~20% for the month and gold was up 4.6%. Silver was the big winner gaining 15% for the month.
  • The dividend equity sleeve was weak in April mainly due to an overweight exposure to utilities (-2.4% in April). Utilities has been amongst the best performers on the S&P500 this year, up 12.8% for the year and has suffered slightly as the market moves out of defensive holdings.
  • 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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