December Net Asset Value


 

TIDMDTL 
 
RNS Number : 7429F 
Dexion Trading Limited 
18 January 2010 
 

Dexion Trading Limited ("the Company") 
 
 
December Net Asset Value 
 
 
The net asset value of the Company's Shares as of 31 December 2009 is as 
follows:- 
 
 
GBP Shares 
 
 
+---------------+--------------+--------------+ 
|      NAV      |     MTD      |     YTD      | 
|               | Performance  | Performance  | 
+---------------+--------------+--------------+ 
| 130.54 pence  |    -0.39%    |   +11.02%    | 
+---------------+--------------+--------------+ 
 
 
In calculating the Company's Net Asset Value the Company's Administrator will 
rely solely upon the valuation of GBP denominated Permal Macro Holdings Limited 
("Permal Macro") Class A shares provided by Permal Macro. The Investment Adviser 
and third party service providers to Permal Macro, rely on estimates of the 
value of Underlying Funds in which Permal Macro invests, which are provided, 
directly or indirectly, by the managers or administrators of those Underlying 
Funds and such valuations may not be considered 'independent' or may be subject 
to potential conflicts of interest. Such estimates may be produced as at 
valuation dates which do not coincide with valuation dates for Permal Macro and 
may be unaudited or may be subject to little verification or other due diligence 
and may not comply with generally accepted accounting practices or other 
valuation principles. The Investment Adviser may not have sufficient information 
to confirm or review the completeness or accuracy of information provided by 
those managers or administrators. In addition, these entities may not provide 
estimates of the value of Underlying Funds in which Permal Macro invests on a 
regular or timely basis or at all with the result that the values of such 
investments may be estimated by the Investment Adviser. Both weekly estimates 
and bi-monthly valuations may be based on valuations provided as of a 
significantly earlier date and hence the published valuation may differ 
materially from the actual value of Permal Macro's portfolio. Other risk factors 
which may be relevant to this valuation are set out in the Company's prospectus 
dated 12th March 2008. 
 
 
Monthly Portfolio Review 
 
 
Investment Adviser Portfolio Outlook 
 
 
The Investment Adviser anticipates that there will be challenges for policy 
makers in 2010 as they attempt to balance the requirements of a still fragile 
global economy with concerns that the continuation of overly accommodative 
policies could trigger new financial difficulties. The Investment Adviser has 
observed that concerns remain regarding the sustainability of the economic 
recovery as aggressive monetary and fiscal policies are wound down, particularly 
within the developed world, and given continued weaknesses in global labour 
markets and declines in consumer spending. This, in turn, may lead to increased 
volatility in the markets that the Portfolio's managers trade. In addition, 
uncertainty in the markets has been increased as governments attempt to better 
their economic position through currency intervention and trade protectionism. 
Consequently, as the growth rates between global economies diverge further and 
central bank policies become increasingly differentiated, the Investment Adviser 
believes that the investment opportunities for the Portfolio's global macro 
managers will increase in diversity. 
 
 
Market Overview 
 
 
December started strongly in the US with positive announcements about non-farm 
payroll data and unemployment figures declining to 10%. Further data 
announcements included increases in US consumer confidence and positive retail 
sales figures. However, other global economies experienced more subdued results. 
In Europe, the downgrading of Greece's credit rating and the possibility that 
other countries may also be downgraded led to fears about the potential impact 
on Europe's slow economic recovery. In Japan, market participants were left 
unimpressed by the Bank of Japan's steps to address the strengthening Yen and 
renewed deflation with an offer of 10 trillion Yen in 3-month funds at 0.1%. 
 
 
Global equity markets rose, supported by improving economic prospects, corporate 
earnings and M&A activity. In the US, equity performance was mixed, but 
ultimately rallied following unanticipated inflation and unemployment data 
announcements and increases in existing home sales, although returns were 
tempered following an announcement on the final trading day of the year 
regarding an unexpected drop in jobless claims, which led to concerns that the 
US Federal Reserve bank may reduce further the stimulus programs. European 
equities also rallied following announcements of third quarter GDP growth in 
Europe and data reflecting a decline in German unemployment; however, concerns 
over Greece and Spain had a negative impact. Japanese equities also rallied as 
the Yen weakened despite a downward revision to third quarter GDP figures. Many 
managers continue to have relatively low levels of exposure to equity markets, 
believing that, as global central banks gradually remove accommodative policies, 
the equity market rally will start to subside. In addition, managers believe 
that current equity market prices already incorporate the effect of a broad 
global recovery. However, many of the Portfolio's managers believe that the rise 
in equities may continue as investors seek higher returns on their investments. 
As such, their view remains one of caution, while continuing to acknowledge that 
there can be a dislocation between economic reality and market action. 
 
 
Global fixed income prices at the long end of the yield curve declined, 
principally on market expectations that central banks would gradually start to 
scale back liquidity measures. Most developed yield curves steepened 
significantly, as the shortest dated yields were typically being anchored by the 
continued central bank policies for low interest rates, while back-end yields 
climbed on concerns of potential supply issues and the deteriorating fiscal 
situation. Much of the price movement was driven by investor expectations 
concerning the timing and magnitude of increases in interest rates. The increase 
in the Japanese 10-year yield was more muted than in the US and Europe. This was 
primarily due to a mid-month rally in JGB prices following comments from the 
Bank of Japan regarding the country's deflationary situation which proved too 
"dovish". Managers continued to be in the "lower for long" camp, as they 
anticipate that developed market policy rates will remain low for an extended 
period. Managers also tend to be positioned for yield curve steepening as they 
expect the long end to continue to sell off given concerns around oversupply and 
the fiscal situation. Another theme within the fixed income sector is the 
differentiation of recovery rates among global economies. In particular, due to 
the likely delay in European growth, this is being expressed through Europe 
versus UK positions at the long end of the curve and Europe versus US positions 
at the short end of the curve. Additionally, as sovereign credit spreads widen 
in Greece, some of the Portfolio's managers are also expecting further widening 
elsewhere, such as in Spain. 
 
 
The longer term downtrend of the US Dollar reversed as the divergence between US 
economic prospects and those of Europe and Japan increased. The Euro faced 
downward pressures as the negative rating of Greece's sovereign debt, and 
potentially that of Spain, sent investors looking for safety in the US Dollar. 
The Japanese Yen also weakened against the US Dollar and Euro following the Bank 
of Japan's intention to curb the strength of the Yen and due to concerns that it 
may need to increase their quantitative easing programme and leave interest 
rates low for an extended period of time. The US Dollar posted mixed results 
against the major commodity-based currencies. Despite the Royal Bank of 
Australia's action to increase interest rates, the US Dollar outperformed the 
Australian Dollar. Australian GDP growth came in lower than expected and the 
Royal Bank of Australia indicated that it may reduce its tightening cycle. The 
US Dollar declined marginally versus the Canadian Dollar, New Zealand Dollar and 
Brazilian Real. While some of the Portfolio's managers are more constructive on 
the US economy, they don't believe that this will necessarily translate into a 
strong US Dollar. Conversely, prospects of the Euro or Yen gaining value are 
also low. As such, some managers remain short the US Dollar in expectation of an 
orderly devaluation, though overall exposure has been reduced. Managers are 
bullish towards commodity-based currencies as the demand for metals and 
agricultural goods remains high and investors continue to seek increased yields. 
Asian currencies are also compelling from the long side, with the Korean Won 
considered to be undervalued and one of the most free-floating currencies in the 
region. Lastly, managers are also bullish towards the Mexican Peso as it is 
extremely undervalued, especially against the Euro. 
 
 
The natural resources sector experienced gains across both commodities and their 
related equities. Performance was driven largely by continued hopes for a global 
economic recovery, particularly in emerging markets. The DJ UBS Commodity Index 
and the Goldman Sachs Natural Resources Index both rose during the month. The 
energy complex delivered positive returns, with both crude oil and natural gas 
generating positive returns due to declining inventories and strong demand. Base 
metal prices also increased, however precious metals were negative due to US 
Dollar strength and year-end profit taking. Agricultural commodities were mixed, 
with sugar, cotton and corn rallying, while wheat saw losses due to oversupply. 
The Portfolio's managers maintain a positive view on the natural resources 
sector. Continued commodity demand from both emerging and developed economies 
will drive prices for several months. In addition, investor demand for hard 
assets amid weakening currencies looks likely to increase. On the equity side, 
M&A activity across the natural resources sector should begin to engage, as 
companies increase their growth rate and as emerging market countries seek to 
lock in future commodity supplies. Although the Investment Adviser expects to 
see continued volatility, the opportunities for commodities appear strong for 
the sector. 
 
 
Strategy Overview 
 
 
Discretionary: +1.40%. Positive returns were delivered by all of the four major 
asset classes traded by the discretionary managers. While exposure to equities 
has typically been minimal, managers who had a bias to long equity positions, 
particularly emerging market equities, were profitable in December. Performance 
was also driven by long emerging market currency positions, including China, 
Turkey and Korea. Despite the reversal in the US Dollar trend, some of the 
Portfolio's managers shifted positioning quickly following announcement of the 
US employment report and profited from long US Dollar positions. 
 
 
Systematic: -3.52%. Trend-following managers suffered throughout the month as a 
number of longer term trends reversed sharply. US Dollar and gold positions 
proved particularly difficult. In addition, long fixed income positions, 
particularly at the long end of the curve also resulted in losses for many trend 
following managers. Non-trend following systematic managers also posted losses 
due to longer term long US Dollar positions. However, those managers with 
positions in yield curve steepening trades profited as global curves steepened, 
particularly the US yield curve which reached a record high. 
 
 
Natural Resources: +0.63%. The strongest performing managers within this 
allocation were those with positions in agricultural-related equities. Managers 
with energy equities were also highly profitable. However, positive performance 
was partially offset by those managers with long gold positions. 
 
 
Relative Value Arbitrage: -0.95%. Equity market neutral strategies experienced 
losses, primarily due to the short positions, with these stocks rallying more 
than their long portfolios. Fixed income arbitrage strategies remained flat. 
 
 
+-----------------------+---------------+--------------+-------------+--------+ 
| Strategy              |  Allocation   |  Number of   |    Performance by    | 
|                       |    as of      | Managers as  |      Strategy        | 
|                       |  31 December  |    of 31     |          %           | 
|                       |      %        |  December    |                      | 
+-----------------------+---------------+--------------+----------------------+ 
|                       |               |              |  December   |  YTD   | 
+-----------------------+---------------+--------------+-------------+--------+ 
| Discretionary§        |      53       |      24      |    1.40     | 19.38  | 
+-----------------------+---------------+--------------+-------------+--------+ 
| Natural Resources     |      4        |      9       |    0.63     | 27.92  | 
+-----------------------+---------------+--------------+-------------+--------+ 
| Relative Value        |      4        |      5       |    -0.95    |  2.59  | 
| Arbitrage             |               |              |             |        | 
+-----------------------+---------------+--------------+-------------+--------+ 
| Systematic§           |      26       |      10      |    -3.52    |  3.51  | 
+-----------------------+---------------+--------------+-------------+--------+ 
| Cash                  |      13       |      -       |      -      |   -    | 
+-----------------------+---------------+--------------+-------------+--------+ 
| Total                 |      100      |     47§      |             |        | 
+-----------------------+---------------+--------------+-------------+--------+ 
 
 
§ Discretionary and Systematic have one manager in common. 
 
 
Strategy returns are in US$ and net of underlying manager fees only, and not 
inclusive of Dexion Trading's fees and expenses. 
 
 
Voting Rights and Capital 
 
 
The Company's share capital consists of 101,213,549 GBP shares with voting 
rights. This figure may be used by shareholders as the denominator for the 
calculations by which they will determine if they are required to notify their 
interest in, or a change to their interest in the Company under the FSA's 
Disclosure and Transparency Rules. 
 
 
Supplementary Information 
 
 
Click on, or paste the following link into your web browser, to view a full 
review of the Dexion Trading Limited portfolio: 
 
http://www.rns-pdf.londonstockexchange.com/rns/7429F_-2010-1-18.pdf 
 
This information is provided by RNS 
            The company news service from the London Stock Exchange 
   END 
 
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