TIDMDTL
RNS Number : 0152F
Dexion Trading Limited
15 April 2011
Dexion Trading Limited ("the Company")
March Net Asset Value
The net asset value of the Company's Shares as of 31 March 2011
is as follows:-
GBP Shares
NAV MTD Performance YTD Performance
-------------- ---------------- ----------------
137.81 pence -0.57% -0.27%
-------------- ---------------- ----------------
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 believe that global growth will
continue, but at a slower pace than early 2011 estimates. In the
US, they expect economic growth to persist as it will benefit from
accommodative monetary and fiscal policy. However, this growth will
be constrained by a weak housing market and high levels of
unemployment which, while improving, remain high. In addition,
increasing food and energy prices are adding to headline inflation
and may begin to weigh more heavily on the consumer. Nonetheless,
core inflation remains subdued and, with considerable excess
capacity still prevalent, managers expect US monetary policy to
remain favourable. In Europe, positive economic data releases and
the recent steps taken to reduce the sovereign risks deriving from
peripheral countries (e.g. expanding the size of the European
Financial Stability Facility, or "EFSF") are cause for cautious
optimism. However, over the longer term, underlying fiscal
problems, namely the high levels of debt and reliance on external
capital, remain unsolved. Monetary policy in many of the emerging
markets stands in considerable contrast with that of the developed
world, where policymakers continue to face strong inflationary
pressures. Therefore, authorities in these markets are likely to
continue using a variety of tools, in addition to interest rates,
to tighten monetary policy. While managers generally expect strong
growth in these regions, they acknowledge that inflation is a cause
for caution.
Market Overview
Turmoil in the Middle East and North Africa continued in March
with the international community imposing a no-fly zone in Libya
and conducting air strikes. However, the event that most captured
the market's attention was the devastating earthquake and tsunami
that took place in Japan on 11 March 2011. The economic damage was
estimated at Yen15T, prompting the Bank of Japan to inject Yen20T
into the money markets. As financial market volatility surged,
global equity markets fell sharply in the days following the
tragedy, with the Nikkei falling 19% on 15 March 2011. Following
this, risk assets rebounded strongly at the end of the month as the
situation in Japan appeared more contained and investors once again
turned their focus to positive earnings data releases.
Global equity markets experienced a sharp mid-month sell-off but
many recovered strongly into month-end as investors focused on
continuing indications of a healing global economy and greater
comfort that the situation in Japan was being controlled. US equity
markets ended the month flat to slightly up. Although European
equities were down at the end of the month, they did experience
some gains throughout the second part of March as a result of
continued positive economic reports from Germany, including a fall
in the unemployment rate. In addition, the expansion of the EFSF
eased concerns surrounding European sovereign debt issues, while
the market generally disregarded the downgrade of Portugal by
S&P. As with other risk assets, emerging market equities
recouped much of the mid-month losses by the end of the month. Not
surprisingly the worst performer during the month was the Nikkei,
which ended the month down -8.2%. Managers have long exposure to
equities, generally favouring developed markets over emerging
markets, as they believe that the latter group now face the
prospect of monetary tightening and inflation concerns, which are
likely to weigh on the asset class. In addition, valuation in
certain emerging markets looks rather stretched. Developed market
equities, on the other hand, should benefit from continued economic
recovery and accommodative policy, both of which are boosting
investor risk appetite.
Global government bonds experienced losses at the beginning of
the month due to fears of sizeable fiscal deficits. These markets
were also weighed down by concerns surrounding the eventual
withdrawal of accommodative monetary policy. However, bonds
experienced a sharp mid-month bounce on the back of the Japanese
earthquake, benefiting from a flight-to-safety and renewed growth
concerns. As investor optimism rebounded towards the end of the
month, and markets dismissed earlier macro and geopolitical
concerns, bond prices resumed their downward path. In the US, both
2-year and 10-year Treasuries fell on signs of a strengthening US
economy, while German yields rose as a result of the ECB's
increasingly hawkish tone. In the US, some managers hold long
exposures in short-dated bonds, believing that the market pricing
of interest rate expectations is overly aggressive. At the longer
end of the curve, the bearish bond argument appears to be gaining
the upper hand and a few managers hold short positions, believing
fiscal deficits to be unsustainable and that the end of bond
purchases is nearing. In Europe, a number of managers continue to
express their bearish view on the situation at the periphery by
holding credit protection on the subordinated debt of some European
financial institutions. In emerging markets, managers hold long
positions in bonds where they believe the market is pricing in
excessive rate hikes, especially in the short-term. They also have
long exposure to sovereign debt where countries are undergoing
growth with reasonable inflation numbers.
The US Dollar exhibited broad weakness versus its developed
market counterparts, with the notable exception of the Japanese
Yen. The US Dollar failed to capture safe-haven flows even during
the flight-to-safety arising from the Japanese earthquake. Instead,
it suffered from expectations of continued low interest rates in
the US. The slight rise in the US Dollar against the Yen masked a
historic mid-month rise, which reached 78.89 on 17 March 2011,
largely attributable to repatriation concerns in anticipation of a
massive rebuilding effort in Japan. In an attempt to ease market
concerns, the G7 announced a rare and concerted effort to stabilise
the currency, which succeeded with the Yen ending the month at
83.13. The Euro rose on expectations that the ECB would increase
rates in April. Likewise, Sterling benefited from an anticipated
tightening in monetary policy in the UK. After declining at the
time of the Japan earthquake, the Australian Dollar rose sharply,
reaching its highest level against the US Dollar since it became a
free-floating currency in 1983. The US Dollar is likely to remain
under pressure for the foreseeable future as interest rates remain
on hold while a number of other developed market counterparts are
set to raise rates. Managers hold differing views on prospects for
the Euro. On the one hand, those who hold a bearish stance believe
structural problems and headline risks at the periphery are bound
to create downward pressure on the Euro. On the other hand, the
more bullish managers trust that the European policymakers'
willingness to work out the crisis and the ECB's hawkish stance
will continue to be favourable for the currency. Manager consensus
can be found in emerging market currencies, which need to
appreciate to address inflation concerns. In addition, commodity
currencies continue to be supported by rising commodity prices.
However, there is a fair degree of differentiation among emerging
market currencies with managers favouring those of oil-exporting
countries (such as the Indonesian Rupiah, Malaysian Ringgit),
under-valued currencies in strong growth countries (e.g. the
Mexican Peso) and countries where there is less resistance to
currency appreciation and interest rate hikes.
Commodities experienced considerable volatility in March,
starting the month off strongly before declining in tandem with
other risk assets following the earthquake. After a subsequent
strong recovery, commodities and commodity-related equities ended
the month with gains. Energy prices in particular rebounded
powerfully, with oil being a standout performer as a result of
concerns regarding the Middle East. In the agricultural sector,
soybean prices rose, while corn and wheat ended the month lower.
Precious metals generated strong performance with silver reaching a
30-year high and gold also positive. Results in the base metals
sector were more mixed, with aluminium and zinc posting gains while
copper and nickel exhibited weakness. The natural resources space
looks likely to continue experiencing upward price momentum,
although volatility is to be expected given ongoing geopolitical
concerns in the Middle East and uncertainty surrounding the
situation in Japan. In the longer term, supply/demand factors will
likely continue to drive underlying price movements. These
long-term fundamentals currently remain strong for numerous
commodities given strong emerging market demand and structural
supply constraints.
Strategy Overview
Discretionary: -0.12%. Most managers experienced losses as a
result of the sharp mid-month market correction arising from the
Japanese earthquake. Costly positions in the aftermath of the event
included shorts in the Japanese Yen as well as long exposures to
equities. Some managers were able to capture the ensuing market
rebound; however, with many running at reduced portfolio exposure
levels in light of heightened macro risks and market stress, the
subsequent gains were muted. In fixed income, short exposure to US
bonds, with certain managers initiating these positions following
the mid-month risk-aversion flows, performed particularly well.
Long positions in Brazilian bonds also contributed to returns. The
foreign exchange sector likewise proved very lucrative for managers
with short positions in the US Dollar and long exposure to
commodity-related and emerging market currencies, including the
Russian Rouble, Mexican Peso, South Korean Won and Australian
Dollar. Long positions in the Euro also contributed positively to
performance.
Systematic: -1.25%. As market trends sharply reversed towards
the middle of the month, trend following managers suffered
pronounced losses primarily from their long exposure to equities.
Commodities, in particular energy and precious metals, were
ultimately the best performing sectors within this group as these
asset classes rebounded strongly into month end. Short-term trend
followers fared poorly as their systems liquidated positions during
the mid-month sell-off. These positions were not fully
re-established by month end. Non-trend following managers benefited
from gains in the foreign exchange sector, namely long positions in
the Australian Dollar. Short exposure along multiple points of the
German yield curve also proved beneficial.
Natural Resources: -0.16%.While certain managers benefited from
the rise in gold equity prices and energy, others incurred losses
in the agricultural sector. In addition, short natural gas
positioning for an energy-focused manager proved detrimental to
performance when the Japanese earthquake led to a heightened short
covering rally in natural gas futures.
Relative Value Arbitrage: +0.37%.During this volatile month,
some managers within this sub-strategy were profitable, benefiting
from the strong month-end rally in equity markets, while others
ended the month with only minor losses.
Allocation Number of
as of 31 March Managers as Performance by
Strategy % of 31 March Strategy %
-------------------------- ---------------- ------------- -----------------
March YTD
-------------------------- ---------------- ------------- -------- -------
Discretionary-- 51 24 -0.12 -0.26
-------------------------- ---------------- ------------- -------- -------
Natural Resources 11 12 -0.16 2.11
-------------------------- ---------------- ------------- -------- -------
Relative Value Arbitrage 5 3 0.37 2.55
-------------------------- ---------------- ------------- -------- -------
Systematic-- 27 10 -1.25 -0.30
-------------------------- ---------------- ------------- -------- -------
Cash 6 - - -
-------------------------- ---------------- ------------- -------- -------
Total 100 48--
-------------------------- ---------------- ------------- -------- -------
-- 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 99,680,049 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/0152F_-2011-4-15.pdf
This information is provided by RNS
The company news service from the London Stock Exchange
END
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