Purpose Monthly Income Fund January Commentary

Fund Highlights

  • The Fund was slightly negative but performed relatively well in January, remaining steady in the face of volatile market conditions. Dividend equities performed positively for the Fund (following suit with Purpose Core Dividend Fund), while Fixed Income and Real Assets detracted from performance.
  • Fixed Income had a slight negative contribution; strong U.S. Fundamentals supported expectations of further Fed hikes this year and credit spreads continued to widen on slowing global growth. Bank of Canada remained dovish factoring sinking crude oil prices and government bonds returned positive in the month.
  • Dividend equities performed well on their counter-cyclical nature and contributed positively from allocations to utilities, telecom, and consumer staples, while consumer discretionary names underperformed.
  • Real assets were pulled down from materials based allocations as Hudbay Minerals and First Quantum both declined in excess of -40% in January.
  • The Fund rebalanced allocations within the Fixed Income sleeve, increasing exposure to investment grade and government bonds while maintaining high yield allocation at a minimum.
  • 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
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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