Purpose Tactical Hedged Equity Fund May 2016 Commentary

Fund Highlights

  • The upward momentum in value came to a sudden stop as growth stocks regained domination in May. The S&P 500 Pure Growth Index was up +3.64% for the month vs -0.15% for the S&P 500 Pure Value Index.
  • The Fund was negative this month with deep value breaking momentum and losing ground while the broad market gained ground (S&P 500 up +1.8% in May).
  • High net market exposure was maintained through the month as broad markets slowly creep up after a hefty decline in February.
  • Equity futures hedge was the main detractor from Fund performance even as gross futures short position remained low.
  • 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 outperformed by 4% as the loonie weakened against the greenback on contrasting Fundamentals in the two countries.

Market Commentary
Markets ended higher this month on the back of general positive sentiment. Despite numerous macro overhangs, such as possible Fed rate hikes, a weaker yuan and an impending Brexit vote markets continued to climb the wall of worry. US data was better than expected across manufacturing, retail sales and jobs which bolstered calls for a rate hike by July. Canadian GDP and trade data were worse than expected, with the negative effects of the Alberta fires yet to filter into the data. The divergent economic pictures caused the loonie to sell off 4% on the month. Commodities continued to grind higher with crude finding comfort near $50. Investment grade credit and high yield remained in the sweet spot for investors wanting to own risk while also earning an attractive yield.

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