Purpose Premium Yield Fund February Commentary

Fund Highlights

  • The Fund was positive this month as equities bounced off the lows and volatility sank from the highs of 30vol seen on the VIX down to 20vol by month end.
  • Of all puts written, only one ended the month in the money as underlying names performed well and pushed the majority of all put options further out of the money.
  • The Fund was not put into any securities and the portfolio remains composed completely of written put liabilities.
  • The Fund sold 9 additional puts and maintained cash covered puts on 40 names, bringing the total security names for exposure to 49.
  • The Fund paid its first dividend near month end which came completely out of the NAV appreciation.

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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