Purpose Tactical Hedged Equity Fund February Commentary

Fund Highlights

  • The Fund outperformed the broad market as value stocks came back into favour this month with the S&P 500 Value Index up 0.55% compared to the S&P 500 Index down -0.13%. Markets swayed away from trendy large-cap growth stocks and put their momentum behind cheap value stocks.
  • An overweight in the materials sector contributed handsomely to Fund gains and value picks in technology outperformed the market.
  • Ingram Micro was the best performing stock this month as price surged on news that the company agreed to be purchased by Chinese conglomerate, HNA Group at a significant premium.
  • Community Health Systems was the largest detractor this month as the company reported a surprising loss for the last quarter of 2015 ending down -32% for February.
  • The equity hedge futures position was marginally increased from -52% to -55% in February and the underlying future ended out of the money, slightly detracting from Fund performance.
  • With respect to the currency-hedged shares, the Fund continued to hedge U.S. dollar currency exposure maintaining a net U.S. dollar exposure of approximately 7% of the Fund’s NAV.
  • The non-currency hedged shares faced strong headwinds as the Loonie appreciated ~3% against the U.S. dollar.

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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