Purpose Multi-Strategy Market Neutral Fund February Commentary

Fund Highlights

  • The Fund had mixed performance this month with the commodity exposure contributing positively and the currency and equity exposures moving the Fund into the red.
  • The commodity sleeve boosted Fund performance as global commodity complex was up on multiple supply issues. Sugar soared on expected production declines in Southeast Asia. Energy shorts detracted from performance as oil prices rebounded on news of Russia-Saudi production caps.
  • Currencies ended negative with the British Pound short performing well on Brexit concerns and the Swiss Franc short detracting as the currency appreciated on safe haven flows.
  • The U.S. equity sleeve performed well on the value tilt outperformance but these gains were wiped out by U.S. dollar currency exposure. The international equity sleeve was a laggard as the MSCI EAFE was down in excess of -5% this month; the short equity hedge position ended in the money for the international book.
  • The Fund replaced 8 U.S. securities this month and also added a commodity long and short position taking total commodity long and short positions up to 6 each.

Market Commentary
Markets tested lower early in February driven by heightened risk aversion. Risk assets have seen a strong correlation with oil in recent months as WTI sank to multiyear lows. However, as things looked bleakest, sentiment seemed to shift after rumours emerged that the largest oil producing nations were intent on meeting in March to discuss possible production cuts. Crude rallied over 30% off the lows which had a positive transmission effect across equity and high yield markets. Canadian equities outperformed as cyclical sectors saw a sizeable bounce. Talks of increased fiscal stimulus and a waning need for further rate cuts helped the loonie recover over 3%. US GDP and jobs growth was better than expected, and the Fed reiterated its outlook for a gradual liftoff in 2016. Europe still produced sluggish IP and PMI’s, while the threat of a UK Brexit was a further overhang for the Eurozone.

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