Purpose Monthly Income Fund February Commentary

Fund Highlights

  • Positive for the month, the Fund rallied in large part due to exposure to high yield bonds and materials sector exposure. Dividend equities exposure detracted from Fund performance.
  • In fixed income, a relief rally in high yield bonds and the reiteration of the Fed’s economic outlook of gradual lift-off boosted the performance of the Fund. Fixed income remains the largest portion of the Fund with a current cash yield close to 3.5%.
  • Real assets provided the bulk of gains this month as the materials sector surged back on increasing demand of safe haven gold but also on the revival of the commodities complex which had major shake-ups on the supply side such as sugar futures rising on production declines in Southeast Asia.
  • Dividend equities detracted from performance as U.S. REITs suffered on the back of expectations of higher interest rates as the Fed reiterated its liftoff stance.
  • The Fund completed a quarterly rebalance in February removing 12 equity securities with 8 additions. The Fund removed a single commodity position and added 2 commodity positions. The fixed income sleeve maintained tactical allocations through the month as trends remained stable.
  • 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
Markets tested lower early in February driven by heightened risk aversion. Risk assets have seen a strong correlation with oil in recent months as WTI sank to multiyear lows. However, as things looked bleakest, sentiment seemed to shift after rumours emerged that the largest oil producing nations were intent on meeting in March to discuss possible production cuts. Crude rallied over 30% off the lows which had a positive transmission effect across equity and high yield markets. Canadian equities outperformed as cyclical sectors saw a sizeable bounce. Talks of increased fiscal stimulus and a waning need for further rate cuts helped the loonie recover over 3%. US GDP and jobs growth was better than expected, and the Fed reiterated its outlook for a gradual liftoff in 2016. Europe still produced sluggish IP and PMI’s, while the threat of a UK Brexit was a further overhang for the Eurozone.

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