Purpose Tactical Hedged Equity Fund October Commentary

Fund Highlights

  • The Fund was positive this month and performed as expected, hedging out most gains from its previously defensive posture.
  • The Fund’s overweight position in cyclical sectors performed favorably and quality names kept up with the market well. Technology and financials were the best performing positions and all sectors ended positive.
  • An options overlay strategy implemented during the previous month provided +51bps of boost to returns thus benefitting the Fund from upside turn in market momentum.
  • The Fund spent the month heavily hedged with an average exposure of ~35% of the Fund’s NAV during the month and continues to maintain high defensive posture with ~38% market exposure at month end. This exposure is expected to increase if markets continue their current trajectory.
  • With respect to the currency hedged shares, the Fund continued to hedge U.S. dollar currency exposure maintaining a net U.S. dollar exposure at approximately 7% of the Fund’s NAV.

Market Commentary

Global markets rebounded higher in October retracing most of the losses seen in the August correction. The primary catalyst for the move higher in markets was the lowering of expectations for a Fed hike in 2015, as the FOMC remained on hold in October. Sentiment appeared to shift positive despite a global economic backdrop which continued to look weak. In the US, retail sales and ISM trended lower while payrolls disappointed to the downside. Canada saw a majority Liberal victory as well as slightly positive Q3 GDP, however the Bank of Canada remained neutral continuing to downplay the outlook for the economy. European and UK PMI’s were weak, while China reported a slowdown in import activity.

This month there was considerable short-covering across the commodity cyclical complex. Crude oil rallied higher while equities were led higher by energy and materials. Emerging market currencies which were overextended to the downside the previous month were able to recover significantly in October. The CAD dollar rallied 1.8% on the back of a majority Liberal victory and stronger oil prices.

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