Purpose Monthly Income Fund October Commentary

Market Commentary

Markets covered wide ranges in October, driven by a high level of activity from central banks globally. Investors have been seeking yield after the September FOMC announcement when the Federal Reserve did not begin tapering their bond purchasing program. The primary events in October which drove equity markets were the appointment of Janet Yellen as Ben Bernanke’s successor, the government shutdown, and the potential of the U.S. defaulting on its debt. All these events were resolved, with the government shutdown ending, a delay in decisions regarding the debt ceiling to early next year and a general sigh of relief as markets assessed that that Yellen would be a dovish central banker. This motivated yield seeking investors to rally equities and high yield debt. We see this continuing into Yellen’s Senate confirmation in November.

Fund Commentary

The Purpose Monthly Income Fund delivered positive performance in October. The portfolio generates yield from a tactical allocation to bonds and to dividend equities, and aims to protect purchasing power from tactical exposure to real assets through futures and equities. All three allocations were profitable in October.
In bonds, exposure to High Yield and Corporate credit were profitable, and the Fund increased exposure to both asset classes. The Fund’s dividend equities benefitted from the rally in equity markets. Dividend equities saw positive performance across all sectors, with the best sectors being Consumer Staples, Information Technology and Consumer Discretionary. The worst performing sectors were Industrials, Energy and Materials.
The Fund’s exposure to real assets saw upside from Base Metals, Real Estate and Agriculture, while Energy and Precious Metals declined. In spite of the non-inflationary environment, the exposure was profitable due to the upside provided by REITS. However, exposure to Gold and Silver equities underperformed as they continue to see severe selling as commodities decline and miners are challenged to adjust costs to offset their declining margins. The Fund’s risk-balanced portfolio construction constrained exposure to this underperforming sector. The Fund owns about 13% in commodity futures, which all declined during the month. The best performing commodity in the month was Copper down only 0.7%, and the worst performing commodity was Crude Oil, down 5.4%.

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