Purpose Total Return Bond Fund April 2016 Commentary

Fund Highlights

  • With macro variables improving and largely positive data from North America, credit spreads tightened throughout the credit curve; investment grade benchmark rallied 1.6% and high yield benchmark was up 3.1%.
  • Allocations to high yield and investment grade contributed positively to Fund NAV whereas government bonds exposure detracted.
  • The Fund decreased allocation to government bonds over the month and increased exposure to credit spreads, ending the month with a combined 98% exposure to high yield and investment grade. This is the highest exposure to credit for the Fund year-to-date.

Market Commentary
Global markets grinded higher in April with Canadian and European equities outperforming the US. Although the IMF warned of further downside risks to growth, global economic data was largely positive this month spurring hopes for reflation. Manufacturing was stronger than expected while US payroll numbers continued to see strength. Canada surprised to the topside as retail sales and GDP figures came in better than expected. There was considerable focus on the energy meeting at Doha, however, no substantial agreement was reached on production cuts. Nonetheless, crude managed to rally almost 20% on lower inventories and a better growth outlook. Commodity cyclical and EM currencies saw significant strength vs the US dollar. The loonie rallied over 3.5% as the prospect of another BOC rate cut seeming to fade. The strength in the yen was a major focus signifying that the BOJ may have reached the limits of its monetary policy. Bonds in the US and Canada sold off from the highs, while corporate credit continued to tighten.

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