Purpose Tactical Hedged Equity Fund June Commentary

Fund Highlights

  • The Fund was negative in June. Markets ended lower this month as geopolitical uncertainty weighed on risky assets.
  • 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. Healthcare continued to outperform and was the only positive sector this month. Health insurers, such as Cigna and Aetna, were buoyed by a U.S. Supreme Court ruling upholding Obamacare subsidies which paved the way for further consolidation across the industry.
  • However, broad market weaknesses carried over to the Fund’s portfolio, and some of this weakness was offset by the equity hedge implemented. The equity hedge position added approximately 0.60% during the period. At the end of the month the short equity futures hedge position has increased to approximately -30% of the Fund’s NAV and the net market exposure dropped to approximately 60%.
  • The Fund completed its regular monthly rebalance, turning over 6 names in the portfolio.
  • With respect to the currency hedged shares, the Fund continued to hedge its U.S. dollar currency exposure maintaining a net U.S. dollar exposure at approximately 10% of the Fund’s NAV.

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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