Purpose Total Return Bond Fund June Commentary

Market Commentary

The month of June saw a continuation of the equity markets rallying to new highs as central governments reaffirmed their commitment to low rates for a prolonged period of time. Geopolitical concerns in Iraq and the U.S. stance on crude oil exports caused volatility in the energy sector but had little effect on the general equity markets. Volatility continued to sink to multi-year lows across most major asset classes.

The U.S. continued to see improving employment, ISM and PMI, which pointed towards a recovery back to pre-financial crisis levels. Chinese data showed some improvement which served as a reaffirmation of a recovery from pre-financial crisis levels. The ECB launched additional easing in June where they instituted negative rates for the first time in their Deposit Facility and maintained policy to target deflation in the area.

In commodities, energy and precious metals gained while agriculture and base metals declined. Specifically, gold and silver gained as investors rushed back into safe haven investments after renewed conflict in Iraq and the prolonged outlook for a low rate environment. Oil was also up as both WTI and Brent spiked following supply disruption in the Middle East resulting from escalating Middle East tensions.

The Canadian dollar strengthened against the U.S. dollar. The U.S. dollar ended the month at six month lows at levels around 1.06. Previous forecasts had called for a 1.15 U.S. dollar, but the current strength in the Canadian dollar can be attributed to higher WTI oil, and a better than expected May CPI report in Canada, which showed 2% plus inflation for the first time in 2 years. This pointed towards rising inflation in Canada, but did not shake the BoC’s general view of a prolonged low inflation environment. They attributed the 2% plus move to a spike in energy costs which is not indicative of core inflation, and kept rates at 1%.

Fund Commentary

The Fund tactically allocates across the credit spectrum including high yield, investment grade, government bonds, and cash. The Fund was up for the month of June and currently has exposure to high yield, investment grade and government debt.

The current portfolio is positioned to benefit from increasing demand for corporate debt, with a tilt towards high yield over investment grade debt. With the Fed remaining highly accommodative and the outlook for low rates likely to extend further, the hunt for yield continued to drive demand especially for high yield. The Fund’s exposure to corporate and government debt; which all finished higher this month, contributed to the positive performance.

The Fund maintained its position of approximately 66% in high yield debt, lowered its exposure to investment grade to approximately 31% and increased its exposure to government debt to approximately 2% of the Fund. The Fund maintained a cash position of approximately 1%.

Return to Post Listing

Fields marked with an * are requiredLES CHAMPS MARQUÉS D'UN * SONT OBLIGATOIRES
Fields marked with an * are requiredLES CHAMPS MARQUÉS D'UN * SONT OBLIGATOIRES

ENTER THE WORD "ANTISPAM" INTO THIS BOX
(WITHOUT THE QUOTATION MARKS)