TIDMDTL
RNS Number : 9600C
Dexion Trading Limited
15 March 2011
Dexion Trading Limited ("the Company")
February Net Asset Value
The net asset value of the Company's Shares as of 28 February
2011 is as follows:-
GBP Shares
NAV MTD Performance YTD Performance
-------------- ---------------- ----------------
138.60 pence +0.58% +0.30%
-------------- ---------------- ----------------
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 remain constructive on global economic
growth and many portfolios have a "risk-on" bias. However, managers
remain aware of the risks in the global economy and, in particular,
the situation in the Middle East and North Africa. As the events of
the past month have demonstrated, food inflation is an increasingly
concerning challenge for the global economy. Many, however, think
that the popular macro risks entering this year, such as the
European debt crisis, have been well recognised and priced in, with
the authorities adopting measures to address these problems.
Market Overview
During February, tensions in the Middle East were the primary
driver of sentiment and the resulting price movements during the
month. Egypt's President Hosni Mubarak announced his resignation
early in the month, but protests continued to spread throughout the
region with most of the attention during the second half of the
month centered on Libya. The subsequent rise in energy prices
resulted in a reversal of the "risk-on" trade that dominated the
first part of the month. Inflationary concerns also weighed on
investors as commodity prices increased sharply. Several emerging
market countries, including China, moved to tighten monetary policy
in order to avoid the rise in prices. The Bank of England and
European Central Bank likewise moved closer to interest rate
increases.
Amid rising volatility, global equity markets posted strong
returns in February with developed market stocks outperforming
those of the emerging markets. The S&P 500 rose steadily
throughout the month, fuelled by generally positive economic data,
including increases in personal spending and income, and
better-than-expected earnings reports from leading companies.
Towards the end of the month, escalating tensions in Libya and the
resulting surge in crude oil prices dampened investor risk
appetite, causing US equities to drop by nearly 3% over the course
of three days. However, most of these losses were recouped in the
final trading days of the month as OPEC eased oil supply disruption
concerns, pledging to cover any shortfalls. Equities in Europe
disregarded continuing debt issues in peripheral countries and were
led higher by positive economic data, including a record high in
Germany's Ifo Business Climate Index and advances in fourth quarter
Eurozone GDP. Japanese stocks rallied strongly in February,
supported by rising industrial production and better-than-expected
fourth quarter GDP. Conversely, equities in emerging Asia decreased
sharply as China raised interest rates for the third time in the
current cycle. Emerging markets equities in general showed
lacklustre performance as investor rotation from emerging to
developed markets increased early in the month. In general,
managers tend to have long positions in developed market equities,
rather than in emerging markets. The rotation from emerging market
stocks into developed markets is likely to continue as emerging
markets challenge inflation with tighter monetary policy. In
addition, valuation in certain emerging markets looks a bit
stretched. Developed markets on the other hand should benefit from
continued economic recovery and flexible policy, both of which aid
to increase risk appetite.
Bond yields rose in early February, but declined throughout the
latter half of the month as turmoil in the MENA region drove
investors to safe haven assets. At the start of the month, US
Treasury yields rose higher reflecting the "risk-on" environment
amid an improving economy and flexible monetary policy. However,
the combination of continued problems in the Middle East, combined
with ongoing sovereign debt issues in the Eurozone, led to a
flight-to-safety rally in US Treasuries. Yields on UK Gilts and
benchmark European bonds followed a similar direction, while
peripheral Eurozone yields widened steadily throughout the month
with concerns regarding Portugal at the forefront. In Japan, JGBs
declined towards the end of the month due to Moody's downgrading of
Japan's credit outlook from "stable" to "negative". Within emerging
markets, bond spreads widened given the flight-to-quality.
Positioning in the US bond market is still divided between two
general schools of thought, although risk levels remain fairly
light. Some of the Portfolio's managers are short US bonds based on
the view that US growth is strengthening and cite the detrimental,
long-term effects of loose US monetary policy. Those managers who
are long believe that short bond positioning has become extreme and
still see some challenges to US growth. In Europe, some managers
continue to play the widening spread of peripheral bonds versus
core Europe.
Currency markets experienced volatile price action in February,
with safe haven currencies and those of oil producing countries
ultimately ending higher. The US Dollar strengthened at the
beginning of the month due to strong economic reports in the US,
but subsequently sold-off amid the flight-to-safety later in the
month. Although the US Dollar typically benefits in times of global
uncertainty, higher oil prices led to speculation that US monetary
policy would remain accommodative for some time. On the contrary,
expectations that the Bank of England and European Central Bank
would tighten policy sooner rather than later benefited Sterling
and the Euro. The Swiss Franc and Japanese Yen also appreciated
during the month as the safe haven currencies of choice. Higher oil
prices had a positive impact on most commodity currencies such as
the Australian Dollar, Norwegian Krone and Canadian Dollar.
However, exceptions included the Brazilian Real and the New Zealand
Dollar, the latter declining after the earthquake in Christchurch.
The US Dollar is likely to remain under pressure for the
foreseeable future as the Federal Reserve remains on hold, while a
number of other developed market counterparts are set to raise
rates. Although the Euro may face short term volatility amid the
European sovereign debt crisis, the Portfolio's managers believe
the Euro and Sterling are poised to rally in the short term as
respective central banks move closer to rate changes. However, over
the long term, managers expect funding currencies in general to
underperform emerging market currencies, which are likely to
continue to gain support from rising commodity prices and hawkish
central banks. There is a good deal of differentiation among
emerging market currencies and, going forward, managers prefer
Asian currencies, which managers see as undervalued, benefiting
from both strong growth and inflationary pressures. Favourites
include the Korean Won, Taiwanese Dollar, Singapore Dollar,
Malaysian Ringgit and the Chinese Renminbi.
The natural resources sector was up in February, with both
commodities and commodity-related equities posting gains. Positive
performance was largely due to a significant increase in oil
prices, which continued to rally given the political turmoil in the
Middle East. Investors disregarded the potential impact of higher
oil prices on economic growth and bid up equities, particularly
energy related equities. Natural gas was the one weak spot in the
energy sector, falling 8.7% during the month as inventories in the
US remained high. Base metals posted positive performance due to
continued strong economic growth, despite the potential for demand
destruction due to rising oil prices. Gold and silver posted strong
gains amid uncertainty surrounding the situation in the Middle East
and rising inflation fears. Agricultural commodities experienced a
volatile month, significantly selling off before recouping losses
towards the end of the month. Cotton was the strongest performer,
posting a gain of +17% during February, due to tight supply/demand
fundamentals, particularly in relation to emerging market demand.
The natural resources space is likely to continue experiencing
upward price momentum, though volatility is to be expected given
ongoing geopolitical
concerns in the Middle East and the fragile state of the
economic recovery. This is particularly the case given the impact
of rising oil prices on global economic growth. Longer-term,
supply/demand factors will continue to drive underlying price
movements. These long-term fundamentals remain strong for numerous
commodities given emerging market demand and structural supply
constraints. The Portfolio's managers are generally positioned to
take advantage of these forces via long positions in crude oil, as
well as long positions within the agricultural sector, based on
strong emerging market demand, possible weather disruptions and
pullback in certain sectors such as soybeans. With regards to
metals, several managers remain long gold, but are increasingly
considering long positions in base metals.
Strategy Overview
Discretionary: +0.36%. Gains across this strategy were somewhat
muted as managers held reduced risk levels. However, given their
general "pro-risk" positioning, they fared well during the month,
giving back only a small portion of the gains in the
flight-to-quality which took place at the end of the month.
Profitable trades stemmed primarily from the foreign exchange
sector and included long positions in commodity currencies and in
Asian currencies such as the Taiwan Dollar and Malaysian Ringgit.
Long exposure to developed market equities and commodities also
contributed to gains, as did long positioning in certain emerging
market bonds, such as Brazilian government bonds.
Systematic: +1.03%. Trend following managers benefited from the
significant increase in commodity prices, with gains coming
primarily from long positions in energy and precious metals. Long
positions in equity indices also contributed positively to
performance. Non-trend following managers captured most of their
gains in the currency markets, namely long positions in the
Australian Dollar and Canadian Dollar and, to a lesser extent, long
positions in the Swiss Franc. Some of these gains were offset by
losses in short fixed income positions, which were impacted by the
month end rally in US Treasuries.
Natural Resources: +2.04%.Commodity managers were able to
effectively capture the gains in energy prices, while gains within
the agricultural sector also contributed positively to performance.
In addition, the rise in gold and gold-related equities resulted in
strong returns for the Portfolio's precious metals traders. Some of
these gains were offset by losses in emerging market oil and gas
equities, which declined amid the rotation out of emerging
markets.
Relative Value Arbitrage: +1.94%.All managers within this
strategy were profitable, benefiting from increased volatility
across fixed income and equity markets.
Allocation Number of
as of 28 February Managers as Performance by
Strategy % of 28 February Strategy %
-------------------- ------------------- ---------------- -----------------
February YTD
-------------------- ------------------- ---------------- --------- ------
Discretionary-- 51 25 0.36 -0.14
-------------------- ------------------- ---------------- --------- ------
Natural Resources 10 12 2.04 2.27
-------------------- ------------------- ---------------- --------- ------
Relative Value
Arbitrage 5 4 1.94 2.17
-------------------- ------------------- ---------------- --------- ------
Systematic-- 26 10 1.03 0.96
-------------------- ------------------- ---------------- --------- ------
Cash 8 - - -
-------------------- ------------------- ---------------- --------- ------
Total 100 50--
-------------------- ------------------- ---------------- --------- ------
-- 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 100,173,049 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/9600C_-2011-3-15.pdf
This information is provided by RNS
The company news service from the London Stock Exchange
END
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