Purpose Monthly Income Fund September Commentary

Fund Highlights

  • The Fund experienced negative returns from all three asset classes in September as global markets had another turbulent month.
  • Fixed Income saw negative returns as both investment grade and high yield bonds declined on global growth concerns. Canadian Government holdings rallied on safe haven flows and a continued dovish outlook for rates, leading to a positive contribution to the Fund. This month the Fund maintained corporate investment grade bond holdings at 47% and increased government bond positions from 24% to 37% while high yield exposure remained low at approximately 15%.
  • Dividend equities generally performed well on the backs of Fed’s non-decision and outperformed the broad market. Defensive sectors were the best performers as utilities, consumer staples, and real estate experienced gains. The worst performing sectors were energy and materials. The dividend holdings are currently overweight Canada due to more attractive relative valuation of Canadian equities relative to the U.S.
  • Real asset holdings had a challenging month with REITs being the only positive sector for the month. Metals, agriculture and energy were the worst performers driven by commodity prices. Gold did not benefit from its safe haven status either.
  • The Fund continued to hedge U.S. dollar currency exposure maintaining a net U.S. dollar exposure at approximately 7% of the Fund’s NAV.

Market Commentary

Global markets continued to experience volatility in September with major global equity indices ending lower on the month. China remained in sharp focus as declining manufacturing and worsening economic data stoked further deflationary fears. Over the past year, the Fed has prepared the market for an imminent interest rate hike, however they stood still on rates this month citing global economic and financial developments that put further downward pressure on inflation in the near term. With much uncertainty surrounding the outlook for global growth, risk was pared back notably across cyclical sectors. Commodity prices fell led by energy and metals. In currencies, commodity currencies were broadly sold with the loonie making new lows on the year.

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