Purpose Monthly Income Fund March Commentary

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 was negative in March. Equity holdings were down as U.S. and Canadian stock markets pulled back after rallying the previous month. This month real estate was the strongest sector as yields sank after the FOMC. Staples performed well driven by Kraft which surged higher after being acquired by Heinz.

Bond positions were negative. High yield was the worst performer as risk aversion and concerns over rising rates drove outflows from the space. Canadian corporates and government bonds also declined after the Bank of Canada kept rates on hold. Poloz came across less dovish than expected after suggesting recent oil price stabilization and monetary policy action had mitigated some of the negative effects on the economy. The Fund rebalanced high yield holdings up from 19.3% to 28.3% and corporate investment grade down from 29.5%to 18.5%, while government bond holding increased slightly to 1.9%.

Real assets were negative. Gasoil, heating oil and cocoa saw the largest declines this month as ample supply weighed on prices.

The Fund continued to hedge its USD currency exposure, maintaining a net USD exposure of approximately 10% of the Fund’s NAV.

Market Commentary

North American markets stalled after rallying the previous month and ended lower in March. There was much focus on the FOMC meeting this month with many expecting a strong push for a rate hike later this year in light of continued strong job growth. As anticipated, the Fed removed the word “patient” from its statement, however there were some dovish undertones that resulted in a rally in bonds as the outlook for a potential hike was pushed back.

In commodities, oil tested new cycle lows near $40, but managed to bounce into month end on the back of rising Middle East tensions as Saudi Arabia was drawn into the conflict in Yemen.

The USD dollar continued to grind higher, especially against Eurozone currencies. CAD saw further weakness, despite rates being kept on hold, as the Bank of Canada warned of economic slowdown resulting from the shock in oil prices.

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