Purpose Multi-Strategy Market Neutral Fund January Commentary

Fund Highlights

  • The Fund ended the month in the red with losses stemming from the equity portion of the portfolio. Commodities were flat while currency exposure provided positive contribution to Fund returns.
  • Both in the U.S. and internationally, equity exposure was a big detractor as pressure from cyclical sectors continued as energy and financials further declined on a Chinese pullback. The short futures position counteracted market volatility and provided downside protection for the Fund this month.
  • The commodity positions gained from shorts in the energy sector; however these were offset by long positions in sugar and cocoa futures as news of higher than expected harvest yields drove prices to a new equilibrium.
  • The currency book was positive as the loonie recovered against most currency pairs from an oversold position.
  • The Fund replaced one U.S. and five international equities in January. Brent Crude shorts were removed from the commodities book while the Czech Koruna was replaced by the British pound in the short currency allocation.

Market Commentary
2016 had a tumultuous start as markets sold off in one of the worst January performances on record. China was a catalyst as markets became unnerved by the rapid devaluation of the yuan which potentially signalled a slowdown in world’s growth engine. Oil sold off to new cycle lows touching $26 which put further pressure on commodity producing nations and exacerbated concerns of global deflation. After the Fed move in December, the market digested the prospect of another series of hikes which led to further uncertainty. Safe haven assets saw inflows as US 10yr yields sank below 2% and gold rallied 5%.

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