Purpose Monthly Income Fund January Commentary

Market Commentary

Global stock markets pulled back sharply after closing out 2013 at the highs, as heightened emerging market volatility triggered a broad sell off across risk assets. Destabilizing events in Turkey and Argentina received the majority of the headlines. Furthermore, weaker Chinese manufacturing data pointing towards a slowdown also fuelled negative sentiment. As a result, foreign investment flows broadly exited the emerging market (EM) space and into safe havens such as bonds and gold. In the U.S., an unexpectedly poor payrolls number was at odds with recent upward trends in economic data. Despite the market turbulence, the Fed tapered an additional $10 billion, signaling that it was staying the course for an eventual exit from its QE program. In Canada, weak employment and trade data suggested that the BOC would maintain a dovish stance going forward.

Fund Commentary

The Fund has an income allocation to bonds and high-dividend equities, and has a real asset allocation for purchasing power protection.
The Fund saw positive performance for the month of January from all three of its allocations as the Fund’s exposure to real assets, bonds and dividend paying equities all generated positive returns during the month.

The best performing sectors for income equities were utilities, real estate and health care, while the worst performing sectors were financials, energy and information technology. Among real assets, gains in real estate and precious metals offset losses in agriculture and energy. The bond allocation benefitted from the U.S. Fed tapering policy and all three credit segments performed well into the end of month FOMC meeting. The Fund’s largest exposure is to corporate credit, with a focus on high yield.

The Fund completed a monthly rebalance which maintained approximately 33% in high yield debt, increased its holdings in investment grade debt slightly. There was no change to the income equities.

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