September Net Asset Value


 

TIDMDTL 
 
RNS Number : 3798U 
Dexion Trading Limited 
14 October 2010 
 

Dexion Trading Limited ("the Company") 
 
September Net Asset Value 
 
The net asset value of the Company's Shares as of 30 September 2010 is as 
follows:- 
 
GBP Shares 
 
+------------+-------------+-------------+ 
|    NAV     |    MTD      |    YTD      | 
|            |Performance  |Performance  | 
+------------+-------------+-------------+ 
|  134.48    |   +2.09%    |   +3.02%    | 
|   pence    |             |             | 
+------------+-------------+-------------+ 
 
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 Portfolio's managers have increasingly discounted the likelihood of a 
"double-dip" recession in favour of a "muddle through" scenario. In particular, 
they believe growth in the US is likely to be subdued for an extended period. 
Similarly, European growth is also prone to slowing amid fiscal tightening in 
the region and a potential drag from neighbouring countries. Managers note that 
developed country consumers still need to de-lever, while employment and housing 
remain feeble. In this environment, monetary policy needs to remain flexible for 
some time and is likely to take the form of additional quantitative easing, as 
expected in the US. Managers continue to believe that emerging markets will fare 
better than their developed market counterparts as investors move towards higher 
yielding assets. However, they remain mindful that sustained weakness in the 
developed world could re-test the de-coupling theory. 
 
Market Overview 
 
Throughout September, markets were driven by expectations of a new round of 
quantitative easing in the US. As a result, despite mixed economic data, risk 
assets rallied during the month. In the US, employment remained weak, with the 
unemployment rate increasing from 9.5% to 9.6%. The US Dollar was also weak, 
however exports were able to gain 2% from this, as did ISM manufacturing, which 
also posted an unexpected gain. The US housing market also showed moderate signs 
of improvement, with a climb in existing home sales and a modest improvement in 
new home sales, though house prices declined. Near month-end, the Federal 
Reserve voted to maintain the current Fed funds' target rate and noted concerns 
about deflation, indicating that inflation is trending below preferred levels 
and additional quantitative easing measures may be utilised to address the 
issue. In Europe, the latest fears over the peripheral countries centered on 
Irish banks. The Irish government announced a bailout plan for the ailing banks, 
estimating that the ultimate cost could reach EUR50B. One of the most notable 
events during the month was the Bank of Japan's currency intervention on 
September 15th. The Bank of Japan sold JPY2.12T in an attempt to stem the Yen's 
appreciation and preserve the export-led recovery. 
 
Global equity markets staged a strong rally in September. In the US, the S&P 500 
returned 8.8%, initially benefiting from the unexpected gain in manufacturing 
PMI at the start of the month. The Federal Reserve's Beige Book report, which 
curbed fears of a "double-dip" recession, also served to push stocks higher. 
Later in the month, despite weaker economic data releases, equities continued to 
trend upwards amid speculation of additional quantitative easing by the Federal 
Reserve. European equities likewise increased in September, aided by encouraging 
economic data, including improved industrial output and better-than-expected 
German business sentiment. In the first half of the month, successful bond 
auctions helped alleviate concerns over neighbouring countries, although fears 
returned later in the month, resulting in a decrease in equity prices. Stock 
prices in Japan also ended the month higher. Early in the month, Japanese 
equities benefited from promising economic data, including an upward revision to 
Q2 GDP. Later in the month, the Bank of Japan's currency market intervention 
buoyed markets amid optimism that a depreciation of the Yen would help 
exporters; however, optimism waned into month end as the Yen remained strong. As 
long as markets expect quantitative easing, US equities should perform well. As 
such, many of the Portfolio's managers are cautiously long, with the expectation 
that equities will likely improve if and when a quantitative easing announcement 
is made (i.e. a classic case of "buy the rumour, sell the fact"). Emerging 
market equities are also expected to perform well, unless a full-blown 
"double-dip" takes place in the developed world. 
 
Global fixed income prices were mixed in September. In the US, despite strong 
risk appetites, Treasury prices ended the month higher. Going into the month, 
increased risk taking resulted in higher Treasury yields as money flowed out of 
bonds. However, yields reversed course and trended lower when the Federal 
Reserve purchased US$3.4B in Treasuries as part of the pledge to reinvest cash 
from maturing mortgage-backed securities and housing agency debt. In addition, 
speculation increased that another round of quantitative easing was imminent, 
particularly amid comments from the FOMC that additional measures may be 
necessary to guard against deflation. Yields on UK Gilts were volatile during 
the month, with the 10-year Gilt yield ultimately ending higher. Yields on Euro 
Bunds also rose for most of September on positive economic news, but fell into 
month-end after reports showed a decline in Eurozone manufacturing growth. 
Yields on sovereign debt of the neighbouring Eurozone countries continued to 
rise throughout the month on the back of further debt downgrades in Ireland and 
concerns over Portugal's deficit. Japanese government bond prices rose during 
the month amid speculation that the Bank of Japan's currency intervention would 
fail to stem the Yen's appreciation, forcing the central bank to increase 
purchases of government bonds. Despite record low yields, many of the 
Portfolio's managers remain long US Treasuries. Managers believe that given the 
softening US data, interest rates are not going up anytime soon. In addition, 
they believe that the risk of inflation in the US is practically nonexistent, 
but rather that deflation poses a bigger threat and, as such, the Federal 
Reserve is likely to pursue quantitative easing in the coming months. Managers 
are generally expressing this view via longer dated bonds as low rates continue 
to push investors further out on the curve. In Europe, managers expect weakness 
within the neighbouring Eurozone countries to continue. Aggressive austerity 
plans increase the probability that these countries may slip back into 
recession. As such, managers hold positions that benefit from the widening of 
peripheral government bonds over German government bonds. 
 
The Japanese Yen, typically a "safe haven" currency, continued to strengthen in 
September contrary to the rally in risk assets. The Yen climbed to a 15-year 
high against the US Dollar as Prime Minister Naoto Kan beat rival Ichiro Ozawa 
in a party vote, leading investors to reduce expectations of a currency 
intervention. However, the following day, the Yen dropped over 3% versus the US 
Dollar as the Bank of Japan sold Yen for US Dollars in an effort to increase the 
Yen from historic lows. Subsequently, the Yen quickly resumed its upward trend, 
ultimately ending the month higher. The Euro also appreciated against the US 
Dollar during the month, benefiting from increased risk appetites and improving 
economic data releases. Risk taking likewise pushed commodity currencies higher, 
as did an increase in commodity prices. The US Dollar declined against most 
other currencies during the month amid expectations of quantitative easing. The 
Portfolio's managers anticipate that the US Dollar will continue to fall in 
anticipation of another round of quantitative easing. In the short term, this 
may likely result in US Dollar weakness versus the Euro. However, over the 
longer term, the Portfolio's managers are cautious on the Euro given fiscal 
concerns, particularly in the neighbouring countries. Several of the Portfolio's 
managers also continue to be bullish the Australian Dollar given the region's 
robust growth, which is likely to press the Reserve Bank of Australia to raise 
rates into year-end. Select emerging market currencies are also attractive given 
relatively higher yields and stronger economic performance compared to developed 
markets. 
 
Commodities and commodity related equities posted significant gains in 
September, driven by the prospect of a new round of quantitative easing in the 
US and signs of continued demand from China. Within the energy sector, crude oil 
gained over 11% on the back of US Dollar weakness, while gasoline rallied over 
8% amid declining US inventories. Base metals, led by aluminum and nickel, 
strengthened during the month as Chinese demand data remained strong, despite 
concerns about the government's policy induced slowdown. Precious metals 
likewise trended higher. Agricultural commodity prices rallied during September, 
with gains in cotton, corn, soybeans and wheat. The sector continued its strong 
performance due to expectations of reduced crop yields following weather-related 
issues in Eastern Europe. Additionally, strong Chinese demand is directed 
towards that country potentially becoming a net importer of agricultural 
commodities in order to meet its rapidly rising domestic demand. The natural 
resources space is expected to face volatility following September's momentum 
driven rally. That said, macroeconomic factors should continue to be at the 
forefront of underlying price movements, as investors assess the potential for 
stable economic growth in both the emerging and developed economies. Despite 
this short-term volatility, long-term fundamentals remain strong for numerous 
commodities given strong emerging market demand and supply constraints. 
 
Strategy Overview 
 
Discretionary: +2.21%. Virtually all managers in this category posted profits 
for the month. Most gains came from the "risk-on" trade, namely long exposure to 
equities, as well as long positioning in emerging market currencies versus the 
US Dollar. Other currency cross-trades such as long the Australian Dollar versus 
the New Zealand Dollar also proved profitable. Smaller gains were registered in 
US Treasuries due to long positions during the second half of the month. 
 
Systematic: +2.02%. Returns among trend following managers were primarily driven 
by long positions in equities, while long positions in agricultural commodities 
and precious metals also proved beneficial. The Portfolio's non-trend following 
managers' returns were driven by long positions in the Australian Dollar, which 
appreciated 8.6% versus the US Dollar during the month. Short bond positions 
held by non-trend following managers detracted marginally from performance. 
 
Natural Resources: +5.38%. Managers benefited from the strong rally in commodity 
prices across the sector. Particularly strong performance was generated from 
long positions in crude oil, as well as gold bullion and gold related equities. 
Positive performance was marginally offset by small losses in natural gas 
positions amid the significant price volatility during the month. 
 
Relative Value Arbitrage: +2.57%.All managers in this group registered gains for 
the month. The equity market neutral managers were particularly strong 
performers with their long positions benefiting from the strong rally in stock 
markets. 
 
+-------------------+--------------+-----------+-----------+------+ 
| Strategy          |Allocationas  |Number of  | Performance by   | 
|                   |    of30      | Managers  | Strategy%        | 
|                   |  September   | as of 30  |                  | 
|                   |      %       |September  |                  | 
+-------------------+--------------+-----------+------------------+ 
|                   |              |           |September  | YTD  | 
+-------------------+--------------+-----------+-----------+------+ 
| Discretionary*    |      55      |    26     |   2.21    |6.14  | 
+-------------------+--------------+-----------+-----------+------+ 
| Natural Resources |      8       |    11     |   5.38    |3.67  | 
+-------------------+--------------+-----------+-----------+------+ 
| Relative Value    |      4       |    4      |   2.57    |3.32  | 
| Arbitrage         |              |           |           |      | 
+-------------------+--------------+-----------+-----------+------+ 
| Systematic*       |      24      |    9      |   2.02    |5.72  | 
+-------------------+--------------+-----------+-----------+------+ 
| Cash              |      9       |    -      |    -      |  -   | 
+-------------------+--------------+-----------+-----------+------+ 
| Total             |     100      |    49*    |           |      | 
+-------------------+--------------+-----------+-----------+------+ 
 
* 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 100,945,049 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/3798U_-2010-10-14.pdf 
 
This information is provided by RNS 
            The company news service from the London Stock Exchange 
   END 
 
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