Purpose US Dividend Fund May 2016 Commentary

Fund Highlights

  • Negative for the month, the Fund performed poorly due to one specific name even as the broad market performed well.
  • Noble Corp dragged the Fund down by -72bps; the company lost a major contract which represented 11% of Noble’s backlog sales and was subsequently downgraded to a Hold by analysts citing weak global offshore drilling growth. Noble was removed from the portfolio in the May quarterly rebalance with the company appreciating ~8% since addition in February 2016.
  • The best performance came from the technology sector where traditional manufacturers experienced a rally (Hewlett-Packard, Western Digital).
  • The Fund completed a quarterly rebalance this month replacing four names in the portfolio; these names increased the earnings yield (lower P/E) and the gross dividend yield of the Fund.
  • 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.

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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