Purpose Multi-Strategy Market Neutral Fund June Commentary

Fund Highlights

  • The Fund was negative in June with losses coming from equities and currencies that were partially offset by gains in commodities.
  • In equities, the health care sector continued to outperform and was the only positive sector this month. Health insurers, such as Cigna and Aetna, were buoyed by a Supreme Court ruling upholding Obamacare which paved the way for further consolidation across the industry. Technology sector underperformed across semiconductors and hardware holdings, while energy exploration and production names declined with crude prices.
  • A tilt towards midcap and value securities detracted from fund performance as large-cap and growth securities outperformed in U.S. markets. The biggest lag on the fund was due to security selection as picks in the technology sector significantly underperformed the market.
  • Technology sector underperformed across semiconductors and hardware holdings, while energy exploration and production names declined with crude oil prices. Health care continued to outperform and was the only positive sector this month.
  • In currencies, both long and short positions were down for the month. Long NZD was the largest negative contributor after the Reserve Bank of New Zealand cut rates unexpectedly by 25 bps in response to slowing growth, low inflation and an overvalued currency.
  • Commodity positions were positive this month. Soybean and soybean meal futures spiked higher as the market experienced extensive short covering after poor weather conditions dampened the outlook for crop yields. Short position in corn futures was the worst performer as the USDA reported smaller domestic stockpiles which buoyed further short covering.
  • The Fund rebalanced commodity positions this month adding long lean hogs, short gasoil and short coffee while deleting long live cattle, long cotton, short wheat and short lean hogs.

Market Commentary

Markets ended lower this month as global geopolitical risks weighed on risky assets. Greece was an overhang on the Eurozone as probability rose that it would default on IMF loans due at the end of the month. The Greek government also shut down local banks and called a surprise referendum which heightened uncertainty. In the U.S. , jobs data came in stronger than expected which put the U.S. Fed on a path to raise interest rates later this year. However, despite the dovish FOMC comments U.S. bond yields continued higher causing volatility across interest rate sensitive assets. In Canada, economic data was mixed as better than expected jobs numbers were offset by weaker GDP and retail sales. This soft data renewed concerns of recession and bolstered calls for further rate cuts from the Bank of Canada.
Commodities were mixed. Energy drifted lower led by Brent oil and heating oil. Grains saw a large move higher as wet weather conditions and bullish USDA reports drove short covering across the complex.
Currency markets were choppy this month as the U.S. dollar took a pause in its upward trajectory ending lower this month. Euro had large swings driven by the uncertainty in Greece, while the CAD dollar closed slightly higher.

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