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Posted by Simon Barcelon on Oct 22nd, 2019

A Cutting-Edge Canadian First To Combat Uncertainty: Purpose Structured Equity Yield Portfolio

Uncertainty continues to cast a long shadow over the markets, creating instability with it as investors prepare for the long haul. With both uncertainty and instability comes anxiety, loss of confidence and pressure to make sure you’re doing everything you can to protect your portfolios.

Without proactive strategies to weather the storm, it’s easy to feel overwhelmed and lose sight of long-term outcomes.

“Despite rising uncertainty on the markets, truly innovative solutions can help you shine a light on the best ways to manage your investment strategy through difficult times. Purpose Structured Equity Yield Portfolio is the kind of innovative strategy that can help give investors peace of mind to meet their goals and objectives,” said Som Seif, CEO and Founder of Purpose Investments.

“This solution provides investors with an elegant approach to adding stability with above-market yields, even while traditionally stable investments, like fixed income instruments, are seeing their returns compressed,” said Seif.

We’ve discussed before how, despite rising uncertainty, truly innovative solutions can help you shine a light on the best ways to manage your investment strategy through difficult times. Sure, instability is uncomfortable.

But it also gives us an opportunity to break new ground and find fresh, inventive ways to invest.

That’s a key approach to realizing real success, for anyone from Investment Advisors on the lookout to protect their clients to individual investors wanting to thoughtfully safeguard their wealth.

Our newest fund, Purpose Structured Equity Yield Portfolio, helps you solve the complex challenges of uncertainty in multiple ways.

The first of its kind in Canada, the fund replicates the outcomes of multiple structured notes into a mutual fund solution for your portfolio. An innovative approach, it’s a one-ticket solution that pairs a stable and tax-efficient yield with contingent downside protection built into the fund via an actively-managed derivatives-based strategy.

As the active manager of the fund, we employ a multi-factor portfolio selection strategy to create a diverse portfolio with a lower correlation to broad equity markets. We start by analyzing macroeconomic factors (e.g. earnings, dividend yields, interest rates, economic/business cycles and geopolitical risks) and selecting Global and North American equity indices that have strong fundamentals, creates value, and reduces risk in a portfolio. Then we invest in derivatives that provide exposure to our selected indices and also include stable income through coupon payments and contingent protection against losses.

How Purpose Structured Equity Yield Portfolio Meets Uncertainty Head-On

Stable Coupon Payments and Contingent Downside Protection

With the fund, you receive a monthly distribution that nets a target yield of 6% per year.  It does this through a diverse exposure to multiple reference indices using derivatives with varying maturity dates.

For each reference index within the portfolio

  • a coupon is paid to the fund every 6 months as long as the reference index level is above the coupon threshold.
  • includes contingent downside protection at maturity, providing the full notional value in your portfolio as long as the reference index level is above the maturity barrier.

Tax-efficient yields driven by equity markets

Since the fund’s strategy invests in Global and North American Equity indices, its yield has no direct link to interest rates. It can generate attractive yield in a low-rate environment that’s taxable as return of capital due to corporate class structure.

This means you get the most tax-efficient returns possible.

A lower correlation than traditional equities

The fund targets a lower correlation to broad equity markets. Less correlation means that when the market moves, especially during times of instability, your investment will move by a lower amount, a key factor in actively guarding your portfolio against instability.

The Bottom Line

Uncertainty can manifest in many different ways. One of the best strategies to guard against it is to add stability. Purpose Structured Equity Yield Portfolio is an innovative, tax-efficient approach to build stability during these times of uncertainty.

Simon Barcelon is a Product Manager at Purpose Investments

All data sourced from Bloomberg unless otherwise noted.

The content of this document is for informational purposes only, and is not being provided in the context of an offering of any securities described herein, nor is it a recommendation or solicitation to buy, hold or sell any security. The information is not investment advice, nor is it tailored to the needs or circumstances of any investor. Information contained in this document is not, and under no circumstances is it to be construed as, an offering memorandum, prospectus, advertisement or public offering of securities. No securities commission or similar regulatory authority has reviewed this document and any representation to the contrary is an offence. Information contained in this document is believed to be accurate and reliable, however, we cannot guarantee that it is complete or current at all times. The information provided is subject to change without notice.

Commissions, trailing commissions, management fees and expenses all may be associated with investment funds. Please read the prospectus before investing. If the securities are purchased or sold on a stock exchange, you may pay more or receive less than the current net asset value. Investment funds are not guaranteed, their values change frequently and past performance may not be repeated.

Certain statements in this document are forward-looking. Forward-looking statements (“FLS”) are statements that are predictive in nature, depend on or refer to future events or conditions, or that include words such as “may,” “will,” “should,” “could,” “expect,” “anticipate,” intend,” “plan,” “believe,” “estimate” or other similar expressions. Statements that look forward in time or include anything other than historical information are subject to risks and uncertainties, and actual results, actions or events could differ materially from those set forth in the FLS. FLS are not guarantees of future performance and are by their nature based on numerous assumptions. Although the FLS contained in this document are based upon what Purpose Investments and the portfolio manager believe to be reasonable assumptions, Purpose Investments and the portfolio manager cannot assure that actual results will be consistent with these FLS. The reader is cautioned to consider the FLS carefully and not to place undue reliance on the FLS. Unless required by applicable law, it is not undertaken, and specifically disclaimed, that there is any intention or obligation to update or revise FLS, whether as a result of new information, future events or otherwise.

Simon Barcelon