Purpose Monthly Income Fund May 2016 Commentary

Fund Highlights

  • Positive for the month, the Fund gained positive contributions from the fixed income and dividend equities sleeve while real assets detracted from Fund performance.
  • In fixed income, trends from the previous month continued; largely positive macro variables led to tighter credit spreads in North America which helped high yield and investment grade bonds rally. The high allocation to these sectors was a big positive for the Fund.
  • Dividend equities performed well in cautious markets and the only significant losses came from holdings in Canadian financials. Real estate holdings in the U.S. were major contributors to Fund performance.
  • Real assets were negative as materials continued to show volatility and commodities declined with silver down -10%, copper -8.4%, and gold -5.9%.
  • An international equity exposure sleeve was added to the Fund this month with a total weight of 5%. This international exposure was gained through Purpose International Dividend Fund and will further diversify Fund holdings while maintaining high income levels.
  • 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 ended higher this month on the back of general positive sentiment. Despite numerous macro overhangs, such as possible Fed rate hikes, a weaker yuan and an impending Brexit vote markets continued to climb the wall of worry. US data was better than expected across manufacturing, retail sales and jobs which bolstered calls for a rate hike by July. Canadian GDP and trade data were worse than expected, with the negative effects of the Alberta fires yet to filter into the data. The divergent economic pictures caused the loonie to sell off 4% on the month. Commodities continued to grind higher with crude finding comfort near $50. Investment grade credit and high yield remained in the sweet spot for investors wanting to own risk while also earning an attractive yield.

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