Purpose Total Return Bond Fund February Commentary

Fund Highlights

  • The Fund was positive in February riding on a move to safe assets as government bonds and high yield rallied.
  • A large allocation to government bond securities boosted Fund performance as the Fed reiterated its outlook for a gradual liftoff in 2016 after better than expected GDP and jobs growth numbers in the U.S.
  • High yield bonds experienced a relief rally in February as equity markets stabilized in the latter half of the month with volatility decreasing. The Fund maintained minimum allocation to high yield through the period as trends continued to point downwards.
  • Despite corporate bonds (largest allocation in Fund) declining for the month, PBD maintained a positive return.
  • Options positioned to capitalize on high yield rally were accretive to Fund performance.
  • The Fund maintained tactical exposures to the three sectors through the month as momentum trends carried steady for the first time in months.

Market Commentary
Markets tested lower early in February driven by heightened risk aversion. Risk assets have seen a strong correlation with oil in recent months as WTI sank to multiyear lows. However, as things looked bleakest, sentiment seemed to shift after rumours emerged that the largest oil producing nations were intent on meeting in March to discuss possible production cuts. Crude rallied over 30% off the lows which had a positive transmission effect across equity and high yield markets. Canadian equities outperformed as cyclical sectors saw a sizeable bounce. Talks of increased fiscal stimulus and a waning need for further rate cuts helped the loonie recover over 3%. US GDP and jobs growth was better than expected, and the Fed reiterated its outlook for a gradual liftoff in 2016. Europe still produced sluggish IP and PMI’s, while the threat of a UK Brexit was a further overhang for the Eurozone.

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