Purpose Premium Yield Fund April 2016 Commentary

Fund Highlights

  • The Fund was negative for the month of April after being put into two equity securities which experienced downside losses, GAP and Jabil Circuit.
  • Volatility picked up in the latter half of the month, increasing liability exposures which had been written earlier in the month; this increase in volatility detracted from Fund performance.
  • The manager implemented a market hedge to protect the Fund from systematic risk of the whole market moving downwards. This market hedge was implemented on ~13% of Fund’s NAV.
  • As of month end, ~8% of the Fund was exposed to being put as options written on Apple and United Continental Holdings ended in the money.

Market Commentary
Global markets grinded higher in April with Canadian and European equities outperforming the US. Although the IMF warned of further downside risks to growth, global economic data was largely positive this month spurring hopes for reflation. Manufacturing was stronger than expected while US payroll numbers continued to see strength. Canada surprised to the topside as retail sales and GDP figures came in better than expected. There was considerable focus on the energy meeting at Doha, however, no substantial agreement was reached on production cuts. Nonetheless, crude managed to rally almost 20% on lower inventories and a better growth outlook. Commodity cyclical and EM currencies saw significant strength vs the US dollar. The loonie rallied over 3.5% as the prospect of another BOC rate cut seeming to fade. The strength in the yen was a major focus signifying that the BOJ may have reached the limits of its monetary policy. Bonds in the US and Canada sold off from the highs, while corporate credit continued to tighten.

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