Tuesday April 14th, 2015
The Fund holds a portfolio of fundamentally selected stocks together with a dynamic futures hedge. The Fund also incorporates an unhedged series (PHE.B) which maintains the same portfolio of equities and short S&P futures but does not hedge its USD exposure.
The Fund was slightly down in March, as U.S. stock markets pulled back after rallying the previous month. The Fed pushed back expectations of a rate hike this year stating concerns over moderating growth which made for a choppy trading range. Healthcare, consumer discretionary and staples were the best performing sectors with Centene, Steel Dynamics and Fresh Del Monte the most profitable names. Tech, energy and industrial sectors were the laggards with Rowan, Sandisk and Seadrill the weakest performers.
The Fund completed a monthly rebalance, turning over 14 names in the portfolio. The new additions were Aetna, Atwood Oceanics, Best Buy, Deere, Gatyx, Mattel, Marathon Oil, Murphy Oil, Oil States International, PBF Energy, SM Energy, Supervalu, United Continental and United Rentals. The deletions were Andersons, Cameron International, Chicago Bridge and Iron, Foot Locker, Guess, Helmerich & Payne, Harsco, KBR, Lifepoint, Oceaneering, Rowan, Seadrill, Tal and Valero.
The short futures hedge maintained at approximately 25% of the Fund’s NAV.
The Fund continued to hedge its USD currency exposure maintaining a net USD exposure at approximately 10% of the Fund’s NAV.
North American markets stalled after rallying the previous month and ended lower in March. There was much focus on the FOMC meeting this month with many expecting a strong push for a rate hike later this year in light of continued strong job growth. As anticipated, the Fed removed the word “patient” from its statement, however there were some dovish undertones that resulted in a rally in bonds as the outlook for a potential hike was pushed back.
In commodities, oil tested new cycle lows near $40, but managed to bounce into month end on the back of rising Middle East tensions as Saudi Arabia was drawn into the conflict in Yemen.
The USD dollar continued to grind higher, especially against Eurozone currencies. CAD saw further weakness, despite rates being kept on hold, as the Bank of Canada warned of economic slowdown resulting from the shock in oil prices.