Dexion Absolute Limited (the
“Company”)
October Final Net Asset Values
Ordinary Shares
The final net asset value of the Company’s Ordinary Shares as of
30 October 2015 is as follows:-
Share Class |
NAV |
MTD
Performance |
YTD
Performance |
GBP Shares |
191.66p |
+0.61% |
+4.23% |
2011 Redeemed Shares
The net asset value of the Company’s 2011 Redemption Portfolio
was $1.40 million as of 30 October 2015. This was attributed to the
Redeemed Share class as follows:-
Share Class |
NAV per Redeemed
Share |
EUR Shares |
US$ 0.0251 |
All of the Redeemed Shares have been cancelled. Accordingly, the
“NAV per Redeemed Share” represents the amount then owed by the
Company in respect of such Redeemed Shares at the relevant
date.
2012 Redeemed Shares
The net asset value of the Company’s 2012 Redemption Portfolio
was $3.23 million as of 30 October 2015. Shares redeemed pursuant to the
2012 Redemption Offer have a single USD net asset value based upon
exchange rates at the relevant date. This was attributed between
Redeemed Share classes as follows:-
Share Class |
NAV per Redeemed
Share |
EUR Shares |
US$ 0.0248 |
USD Shares |
US$ 0.0273 |
All of the Redeemed Shares have been cancelled. Accordingly, the
“NAV per Redeemed Share” represents the amount then owed by the
Company in respect of such Redeemed Shares at the relevant
date.
2013 Redeemed Shares
The net asset value of the Company’s 2013 Redemption Portfolio
was $3.87 million as of 30 October 2015. Shares redeemed pursuant to the
2013 Redemption Offer have a single USD net asset value based upon
exchange rates at the relevant date. This was attributed between
Redeemed Share classes as follows:-
Share Class |
NAV per Redeemed
Share |
GBP Shares |
US$ 0.0292 |
EUR Shares |
US$ 0.0358 |
USD Shares |
US$ 0.0412 |
All of the Redeemed Shares have been cancelled. Accordingly, the
“NAV per Redeemed Share” represents the amount then owed by the
Company in respect of such Redeemed Shares at the relevant
date.
2015 Redeemed Shares
The net asset value of the Company’s 2015 Redemption Portfolio
was $55.44 million as of 30 October 2015. Shares redeemed pursuant to the
2015 Redemption Offer have a single USD net asset value based upon
exchange rates at the relevant date. This was attributed between
Redeemed Share classes as follows:-
Share Class |
NAV per Redeemed
Share |
GBP Shares |
US$ 2.9014 |
EUR Shares |
US$ 2.9670 |
USD Shares |
US$ 4.0524 |
All of the Redeemed Shares have been cancelled. Accordingly, the
“NAV per Redeemed Share” represents the amount then owed by the
Company in respect of such Redeemed Shares at the relevant
date.
These valuations, which have been prepared in good faith by the
Company's administrator, are for information purposes only and are
based on the unaudited estimated valuations supplied to the
Company's investment adviser, Aurora Investment Management L.L.C.
(“Aurora”), by the administrators or managers of the Company's
underlying investments and such valuations may not be considered
independent or may be subject to potential conflicts of interest.
Both weekly manager estimates and monthly valuations may be
produced as at valuation dates which do not co-incide with
valuation dates for the Company, may be based on valuations
provided as of a significantly earlier date, may differ materially
from the actual value of the Company's portfolio and are unaudited
or may be subject to little verification or other due diligence and
may not comply with generally accepted accounting practices or
other generally accepted valuation principles. The Company's
investment adviser, investment manager and administrator may not
have sufficient information to confirm or review the completeness
or accuracy of information provided by those managers or
administrators of the Company's investments. In addition, those
entities may not provide estimates of the value of the underlying
funds in which the Company invests on a regular or timely basis or
at all with the result that the values of such investments may be
estimated by the Aurora. Since 1 April
2013 the Company has been transitioning to becoming a feeder
fund of Aurora Offshore Fund Ltd II ("AOFL II"). AOFL II's
investment manager is also the investment adviser to the Company
and so valuations of the Company's investment in AOFL II may be
subject to potential conflicts of interest. As at 1 November 2015 approximately 93.94% of the
Continuing Portfolio (by NAV) was invested in AOFL II. The value of
designated investments as at 1 November
2015 equates to approximately 1.57% of the Continuing
Portfolio NAV. Certain other risk factors which may be relevant to
these valuations are set out in the Company's prospectus dated
17 October 2007 and the Company's
circulars dated 15 April 2011,
5 April 2012, 22 February 2013, 27 May
2013 and 26 August 2015.
Net asset values for Redeemed Shares include only those costs
and expenses attributable to Redeemed Shares which have been
accrued as at the relevant NAV date.
Monthly Portfolio Review
Investment adviser portfolio
outlook
With news of stronger-than-expected employment figures out of
the US in October, global markets once again appear prepared for
the chance that the US Federal Reserve will hike interest rates in
December. While the implications are vast, a rate hike sets up the
first clear example of divergence in global central banking policy,
particularly with Europe
potentially preparing another round of easing following the
European Central Bank’s December meeting. We expect this type of
divergence to create opportunities for managers specialising in
currency and interest rate trading, two asset classes directly
impacted by these competing policies.
Like the current general market consensus, we believe that a US
Federal Reserve lift-off in December is likely. We view this
outcome as a positive event for many of Aurora’s strategies,
including long/short equities, macro and portfolio hedge. Not only
should divergence in central banking policy allow for robust direct
trading opportunities in fixed income and foreign exchange markets
but it may also force global market participants to apply a more
discerning approach to risk assets, a dynamic that would be a
welcome change for our managers.
In
focus³
As we detailed approximately two months ago in a white paper
titled “Finding Opportunities in the Healthcare Sector” (currently
available on the Aurora website), Aurora is particularly
enthusiastic about the current stock-picking opportunity in the
healthcare sector.
We continually analyse data as we seek insight on which sectors
exhibit the most robust opportunities in which to derive stock
selection alpha, including reviewing metrics like intra-stock
correlation, dispersion and cross-sectional volatility, among other
things. Through this analysis, Aurora expects the current
opportunity set in the healthcare sector to provide a longer-term
fertile environment for stock-picking, creating the potential for
skilled managers to extract substantial stock selection alpha.
Along these lines, we are excited to announce that Aurora has
completed its fourth strategic capital investment with Copernicus
Capital Management LLC (“Copernicus”), a healthcare-focused
long/short equities firm that is managed by John Rende and headquartered in San Francisco. The revenue sharing arrangement
associated with our investment in Copernicus is an added benefit to
Aurora’s investors, especially as Copernicus performs for its
investors and grows its business over time.
Aurora’s familiarity with John extends back 15 years to when he
was a senior portfolio manager at Weintraub Capital Management LLC,
a firm with which Aurora was invested from 1999 to 2006. While at
Weintraub, John was a consistent, meaningful contributor to that
firm, focusing exclusively on investments in the healthcare sector.
After Weintraub closed following the retirement of the firm’s Chief
Investment Officer, John founded Copernicus in 2013 and has since
demonstrated an ability to generate alpha and absolute returns as
he has transitioned to the role of leading his own firm.
Appreciating the meaningful run-up in valuations within the
healthcare sector since 2009, Aurora feels it is important to
select managers that have previously demonstrated success managing
through cycles (and bubbles) and that apply a disciplined low net
approach to healthcare investing. This allows for alpha extraction
through security selection without being dependent on broad sector
moves. Furthermore, given the rapid pace of the news cycle and
disruptive innovation in healthcare today, we particularly value
managers that can dynamically trade healthcare’s sub-sectors
against each other while freely moving across the market cap
spectrum as opportunities present themselves.
We are confident that Copernicus is a manager who exemplifies
each of these characteristics and are delighted to include
Copernicus as an investment across many of the Aurora
portfolios.
Market
overview
- Global equity markets rallied in October as macroeconomic fears
retrenched on the back of strong economic data and speculation over
central banking actions. This was in stark contrast to the market
sell-off during August and September.
- Both emerging and developed markets saw strong equity market
performance, while larger-capitalisation companies generally
outperformed their smaller-capitalisation counterparts. From a
sector perspective, energy stocks stood out from the pack,
benefiting from a rally in crude oil pricing, whereas healthcare
and biotechnology stocks lagged other sectors.
- Fixed income markets were generally impacted by speculation
around central banking policy across the globe. In the US, a
stronger-than-expected employment report increased the likelihood
of a rate hike in 2015 by the US Federal Reserve, leading to a move
higher in US treasury yields. Conversely, in the eurozone,
expectations of further easing by the European Central Bank drove
German bunds lower.
- Within corporate credit, spreads retraced some of the
significant widening that occurred during August and September,
driven by both a rally in risk assets as well as strength in the
energy sector, leading high yield credit to finish the month
higher.
- In global currencies, the US dollar exhibited mixed
performance, strengthening against two of its larger peers, the
euro and the Japanese yen, while weakening against a number of
Asian currencies.
- Finally, in commodities, WTI, Brent crude and gasoline prices
all moved higher during the month, while distillates and natural
gas fell. Similarly, precious metals such as gold and silver
appreciated while base metals such as copper declined
month-over-month.
Long/short credit¹: +0.41%
- Gains were largely attributable to holdings in Argentine
sovereign bonds as well as in an Argentine energy producer, both of
which traded up following Argentina’s general election.
- Additional profits stemmed from long credit holdings in a
supply chain services company, an investment in California real estate and single name
equities.
- Losses were primarily driven by short exposure to the S&P
500 and select Asian currencies.
Long/short equities¹: +2.36%
- The strategy bounced back in October with all three
sub-strategies generating positive results.
- The sector specialists sub-strategy experienced the largest
gains, led by outsized positions in a global semiconductor company
which gained on the news of a bidding war, and a Texas-based oil and gas exploration and
production company which benefited from oil prices
stabilising.
- The geographic specialists also experienced strong results, as
long holdings in industrials, consumer goods, healthcare and
e-commerce companies drove performance.
- The generalists produced a modestly positive return as gains
from long holdings in the technology, consumer and
telecommunications sectors offset losses from short positions,
particularly in the consumer, technology and industrials sectors.
Notable individual contributors included holdings in a design
software and services company, a chemicals company, an online
search engine company, a global pharmaceutical company and an
online travel provider. Conversely, a notable detractor on the long
side was a provider of outsourced medical services that reported
earnings below expectations.
Opportunistic¹: -0.69%
- As risk assets rallied during the month, losses were driven
primarily by short exposure to US equity indices, largely the
Russell 2000 and S&P 500.
- Additional losses stemmed from holdings in a Texas-based retailer as peers reported poor
revenue results and investors grew concerned about the strength of
the Texas economy.
- Losses were partially offset by holdings within the healthcare
sector. In particular, long exposure to a New York-based biopharmaceutical company and a
short healthcare holding contributed significantly.
Macro¹: -1.30%
- Losses emanated predominantly from short exposure to currencies
including the Japanese yen, the Indonesian rupiah, the Malaysian
ringgit, the Korean won, the Chinese renminbi and the Taiwanese
dollar.
- Long exposure to North American energy equities, European
materials equities and US and European credit also detracted.
- Additional losses stemmed from short exposure to gasoline time
spreads and long exposure to the volatility of oil prices. Losses
were partially offset by long exposure to emerging market equities,
European equities and European rates. Short exposure to US
rates, crude oil and UK natural gas also generated profits.
Portfolio hedge¹: -4.25%
- This strategy gave back some performance in October, largely
due to negative results from the tail-risk opportunities
investments.
- The tightening in investment grade credit spreads resulted in
losses for the tail-risk opportunities investments, as did a
position in the Chinese renminbi, which appreciated as the Chinese
central bank continued its heavy intervention in currency
markets.
- Furthermore, the widespread decline in implied volatility in
the US, Europe and Asia equity markets also detracted.
- The short sellers generated mostly negative results due to
short exposures in the consumer, TMT and materials sectors.
Offsetting a portion of the losses were shorts in a digital
identity firm, an aerospace communications provider and
healthcare-related companies.
Event driven¹: +1.83%
- Following a tough couple of months, the event driven strategy
recouped some losses during the month as both the traditional
manager allocations and special opportunities investments generated
positive returns.
- Among special opportunities investments, top contributors
included equity positions in a renewable energy company focused on
emerging markets, a diversified chemicals company, and an aerospace
components and systems supplier.
- Additionally, a special opportunities investment focused on
Argentina (expressed via sovereign
debt, local debt and equity) traded materially higher following
Argentina’s October general election which resulted in a run-off.
Either candidate is generally expected to seek a resolution to the
country’s creditor holdout issue emanating from its 2001
default.
- For the traditional manager allocations, gains stemmed from
long holdings in the industrials, utilities and technology sectors.
Specifically, positions in a German power company, a diversified
infrastructure company and a software products and services company
were positive. Long positions in a French telecommunications
company and a specialty pharmaceuticals company detracted.
Strategy |
Allocation
as of 1 November²
(%) |
Number of hedge funds as of
1 November² |
Performance by
strategy¹ (%) |
|
|
|
October |
YTD |
Long/short
credit |
23 |
3 |
+0.41 |
+1.42 |
Event
driven |
19 |
4 |
+1.83 |
-1.68 |
Long/short
equities |
32 |
11 |
+2.36 |
+4.21 |
Opportunistic |
7 |
3 |
-0.69 |
-7.38 |
Macro |
12 |
6 |
-1.30 |
-3.67 |
Portfolio
hedge |
7 |
2 |
-4.25 |
+3.24 |
Total |
100 |
29 |
|
|
¹Effective 31 May 2011,
31 May 2012, 28 February 2013 and 30
September 2015, DAL created separate redemption portfolios
for redeeming shareholders from the EUR (for 2011, 2012, 2013 and
2015), USD (for 2012, 2013 and 2015) and GBP (for 2013 and 2015)
share classes. All information presented herein is for the
Continuing Portfolio only. Strategy returns are presented for AOFL
II, are calculated in USD, are net only of the fees and expenses of
the underlying managers and are gross of the fees of DAL’s
investment manager and investment adviser and the operating
expenses of DAL and AOFL II. The investment adviser implements the
‘Modified Dietz’ methodology for calculating the DAL portfolio
hedge strategy returns, which takes into account the amount of time
an investment is held. Under unusual market circumstances, there
are certain limitations to the Modified Dietz methodology and under
such circumstances the investment adviser may modify, adjust or
apply a different methodology if it determines in its reasonable
discretion that doing so will more accurately reflect the rate of
return of the DAL Portfolio hedge strategy.
²Allocations are presented for the Continuing Portfolio and
reflect the allocations of AOFL II, which are based on 30 October 2015 results and 1 November 2015 capital allocations, net of cash
effect and including, for Portfolio hedge only, the delta-adjusted
exposure derived from option hedges, the notional value of futures
hedges, and dedicated notional gold exposure, if any. The Company
classifies all managers by reference to only one of the core
trading strategies provided in the chart (which include several
strategies whose nature is multi-strategy). In certain instances,
and over time, a manager may utilise multiple trading strategies.
Consequently, it is possible that the Company’s determination of a
manager’s primary trading strategy may change over time and may
differ from how others may classify such manager’s primary trading
strategy. Strategy allocations may vary over time. Numbers may not
sum to 100% due to rounding.
Manager count reflects the managers in AOFL II. For purposes of
determining manager count, the manager treats investments in
different hedge funds managed by the same manager using the same
strategy as a composite and does not include any “Excluded
Managers”. An Excluded Manager is any manager (1) for which the
Company has submitted a full redemption request or (2) that manages
only “Market Opportunities Investments” within the strategy. Market
Opportunities Investments represent an aggregation of a select set
of unique, concentrated, and opportunistic investments that may be
added to the Continuing Portfolio to benefit from compelling and
timely risk seeking and risk limiting investment opportunities. The
Company’s investment adviser classifies all of the Company’s
managers by reference to only one of the core trading strategies
provided in the chart (which include several strategies whose
nature is multi-strategy). In certain instances, and over time, a
manager may utilise multiple trading strategies. Consequently, it
is possible that the Company’s investment adviser’s determination
of a manager’s primary trading strategy may change over time and
may differ from how others may classify such manager’s primary
trading strategy.
³The In focus section of this report is for information purposes
only. Any opinion expressed in this report, including with respect
to the market events and potential investment opportunities that
may arise, is purely the opinion of the Company’s Investment
Adviser, may be speculative, and is subject to change without
notice. This report should not be considered investment advice or
relied upon as such. This report should be not be considered an
indication of the future investment decisions that the Company’s
Investment Adviser will make for the Company. Statements that are
made in this report that are not based on historical facts are
forward-looking statements. Although such statements are based on
the Investment Adviser’s current estimates and expectations, and
currently available competitive, financial, and economic data,
forward-looking statements are inherently uncertain. There can be
no assurance that the estimates and expectations made in connection
with any forward-looking statement will prove accurate, and actual
results may differ materially. The Investment Adviser makes no
representations or warranties regarding the accuracy or
completeness of the information included in this report and is not
liable in any way as a result of its use.
Supplementary Information
Click on, or paste the following link into your web browser, to
view a full review of the Dexion Absolute Limited portfolio.
http://content.prnewswire.com/documents/PRNUK-0212150924-8C98_DAL_MPR_2015_October_CC.pdf