Purpose Multi-Strategy Market Neutral Fund July Commentary

Fund Highlights

  • The Fund was slightly negative in July driven primarily by currencies, while equities and commodities were positive contributors.
  • In equities, consumer staples, technology and consumer discretionary were the best performers. Commodity weakness across the oil and metals complex dragged on equity holdings in energy and materials which were the worst performers.
  • Commodity positions were positive. Short Brent crude, WTI crude, and heating oil benefitted from the announcement of a historic U.S. backed nuclear deal with Iran, which caused crude to plummet in anticipation of more Iranian oil coming online. Inventory builds and weakening demand exacerbated the move lower as WTI closed below $50 for the first time in many years. Long wheat was the worst performer as prices saw a sharp reversal lower after experiencing heavy short covering the previous month.
  • In currencies, long Brazilian Real was the worst performer this month. Sinking commodity prices and a deteriorating fiscal outlook prompted concerns that Brazil would lose its investment grade credit rating. Short Euro was the best performing currency as the U.S. dollar saw broad strength against most currencies this month.
  • This month long unhedged U.S. equity exposure was a tailwind as CAD declined over 5% against the US dollar.

Market Commentary

In July, global stocks ended higher with strength in the U.S and Europe contrasted by weakness in Canada and China. The Greece overhang was temporarily resolved as Greece voted “yes” to more austerity and in return the ECB provided a bridge loan to tide debtors over until a 3rd bailout could be negotiated. In the U.S jobs data was slightly softer, nonetheless the Fed retained faintly hawkish overtones in its statement preparing the market for the possibility of a rate hike into the end of the year. In Canada, sluggish economic data and falling energy prices prompted the BOC to unexpectedly cut interest rates for a second time this year. Poloz went on to suggest that there were more tools at his disposable to fend off a potential recession.
Commodities ended lower this month. The announcement of a historic U.S backed nuclear deal with Iran caused crude to plummet in anticipation of more Iranian oil coming online. Inventory builds and weakening demand exacerbated the move lower as WTI closed below $50 for the first time in months. Gold plummeted to new multi-year lows as geopolitical fears over Greece waned and the dollar strengthened. Grains also reversed course as prices stabilized after experiencing heavy short covering the previous month.
Currency markets continued to see volatility. The U.S dollar saw broad strength after the Fed indicated a possible rate hike by year end. CAD was one of the worst performers this month falling over 5%.

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