Purpose Tactical Hedged Equity Fund March Commentary

Market Commentary

Global stock markets were roiled by geopolitical events as Russia annexed Crimea triggering widespread condemnation of the action including Russia’s expulsion from the G-8. The U.S. Fed, now chaired by Yellen, announced a continuation of the tapering plan, with new guidelines highlighting that they would be taking a broader view than just jobs growth and inflation. They also indicated hiking interest rates beginning in 2015, a timeline which was perceived as hawkish by the market. Stock markets were generally volatile selling off mid-month and then recovering and approaching new highs by month end.

Commodities were again very active as the events in Russia continued to impact agriculture and energy exports from the region. Lean hogs were up significantly as a fatal swine disease negatively impacted production. Copper and iron ore collapsed on Chinese credit fears, while gold and silver sold off on the Fed’s hawkish guidance. Currencies saw increased volatility, with the Canadian dollar touching 1.1280 before 1.1280 before settling back down at 1.10 by month end.

Fund Commentary

The Fund gained in March as value equities recovered during the month even as equity markets traded sideways. The best performing sectors were energy, consumer staples, health care and information technology, while the worst performing sectors were consumer discretionary, materials, telecommunications and industrials.

The best performing stocks were Pilgrim’s Pride, SanDisk Corp and CVR Energy, while the worst performing stocks were American Eagle Outfitters, Anixter International and Exelis Inc.

Pilgrim’s Pride outperformed on strong earnings from improving US margins, and lower expenses. Sandisk was one of the best performing stocks in the Fund as the company was added to the NASD technology dividend index and a positive read on their IP lawsuit against Hynix helped buoyed the stock. CVR Energy benefited from posting Q4 earnings that were far above expectations and riding the market trend of mid-cap energy stocks outperforming their large cap counterparts.

American Eagle was the worst performing position in the portfolio as the company’s Q1 forecast trailed analyst estimates.
The Fund completed a monthly rebalance at the end of March, turning over 11 names in the portfolio. The equities rebalance targeted profit taking and diversification as the Fund added positions in T Avon Products, Bed Bath and Beyond, ConocoPhilips, International Game Technology, KBR, National Oilwell Varco, Philip Morriss, Seagate, Sysco and Tech Data and sold its positions in Archer Daniels, American Eagle Outfitters, Andersons, EMC Corp, Hollyfrontier, Kohls, Sanderson Farms, Superior Energy Services, Verizon Communications and Exelis. The rebalance also increased the sizing of the short futures hedge to approximately 21% of the fund.

The Fund continued to hedge its USD currency exposure maintaining a net USD exposure at approximately 10% of the Fund’s NAV.

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