Purpose Monthly Income Fund August Commentary

Fund Highlights

  • With broad weakness across asset classes, the Fund ended lower this month. Bond positions were negative in August as high yield and investment grade bond positions were negatively affected by risk aversion in the market, which drove outflows and widened credit spreads.
  • Equities were unprofitable as Real Estate, Materials and Consumer Discretionary sectors underperformed.
  • Real asset performance was mixed for the months. Safe haven flows drove gold prices higher, while agriculture positions in soymeal and cocoa were negative.
  • This month, the CAD depreciated slightly against the USD providing tail-wind for the non-hedged long USD exposure of the Fund.
  • The Fund continued to hedge USD currency exposure maintaining a net USD exposure at approximately 7% of the Fund’s NAV.

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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