Purpose Tactical Hedged Equity Fund March Commentary

Fund Highlights

  • Value stocks came soaring back in March and have handily outperformed Growth YTD with the Russell 1000 Value Index up +1.64% for Q1/16 compared to the Russell 1000 Growth Index up +0.74% for the same time period.
  • Sector overweighting for energy and materials again torqued Fund returns upwards. WTI crude rallied +13.6% in March as OPEC continues to discuss a production freeze, bringing anticipated supply into controlled levels.
  • The long equity portion of the portfolio returned +8.9% for the month, outperforming the broad index (S&P 500) by +214bps.
  • The equity hedge futures position was decreased from -55% to -43% in March and detracted from Fund performance, however, this was partially offset by an option overlay strategy which helped recoup losses on the futures hedge by +54bps, contributing to the Fund’s return.
  • 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 received strong headwinds as the loonie appreciated +4% against the U.S. dollar.

Market Commentary
Markets retraced higher in March with the S&P recovering almost all its year to date losses. Oil bounced off the lows in anticipation of a meeting between OPEC and non-OPEC nations to discuss production freezes. US employment numbers continued to see strength which bolstered the argument for further Fed hikes this year, however, Yellen surprised the market taking an abrupt dovish turn while citing recent financial developments in her reluctance to tighten further. As a result, the US dollar sold off broadly, credit tightened and risk assets rallied. In Canada, a poor jobs number was offset by upward surprises to retail sales and GDP. The government also announced a budget deficit plan which would include a large infrastructure spending program aimed at stimulating more growth.

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