Purpose Tactical Hedged Equity Fund December Commentary

Purpose Tactical Hedged Equity Fund December Commentary

Fund Highlights

  • Pressure remained on the Fund in December as the value and mid-cap tilt remained out of favour. As profits are expected to accelerate in 2016, value stocks are expected to regain favor on improving market conditions in the U.S.
  • Short futures position counteracted market beta and provided positive contribution for the Fund this month. The short position was increased to -31% from a previous -26%.
  • Defensive sectors were the only positive contributors to Fund performance and cyclicals were the worst performers led by energy, materials, and industrials.
  • Keurig Green Mountain was the outstanding winner this month spiking over 70% higher after JAB announced a $13.9 billion takeover. Kennametal was the worst performer this month after reducing its fiscal guidance for 2016 on the back of weaker than expected demand for mining, oil and gas and other industrial products.
  • The Fund completed a monthly equity rebalance in December replacing six names.
  • With respect to the currency-hedged shares, the Fund continued to hedge U.S. dollar currency exposure maintaining a net U.S. dollar exposure at approximately 7% of the Fund’s NAV.

Market Commentary

Stocks and bonds ended lower in December to close out generally choppy performance for 2015.[Add sentence or 2 on 2015 market performance for U.S. equities, Canadian Equities, MSCI EAFE (local currency) and Canadian Fixed Income and oil and gold.] The main focus this month was on the FOMC decision. After another solid U.S. job number gave the green light for “lift off” the Fed delivered by hiking rates by 0.25% for the first time in a decade. The Fed went on to assuage concerns over the pace of future hikes by promising that the path would be gradual and data consistent. In Europe, Draghi underwhelmed on the extent of rate cuts and further QE measures which sparked a sharp rally in the Euro and European yields. In Asia, Chinese growth concerns resurfaced as the central bank allowed the yuan to weaken to its lowest level in over 4 years. In commodities, oil sold off further to new lows on the year after OPEC maintained its current production rate which disappointed potential expectations for a potential supply cut. Canada traded poorly on the back of this as the loonie and the S&P/TSX both sold off to end the year.

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