TIDMDTL
RNS Number : 5361Q
Dexion Trading Limited
20 October 2011
Dexion Trading Limited ("the Company")
September Net Asset Value
The net asset value of the Company's Shares as of 30 September
2011 is as follows:-
GBP Shares
NAV MTD Performance YTD Performance
-------------- ---------------- ----------------
135.73 pence -1.60% -1.77%
-------------- ---------------- ----------------
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
Managers have an increasingly negative outlook on the global
economy, with most of the bearishness centred on Europe as problems
at the periphery continue to be unresolved; the region now appears
to be entering a recession, with Germany and France showing signs
of weakness. Managers also acknowledge that the probability of a
recession in the US has increased as the economy continues to be
plagued by high unemployment, a weak housing sector and very large
budget deficits. Within emerging markets, managers are now
questioning the probability of a hard landing in China. Overall,
the outlook for emerging markets is less positive as it will be
difficult for them to do well when their two largest customers, the
US and Europe, are suffering.
Market Overview
September was dominated by risk aversion and volatility as the
European sovereign debt crisis showed no signs of abating and
economic data caused heightened fears of a global recession. In the
US, a disappointing non-farm payrolls release proved that the US
economy added no net jobs throughout the month. Meanwhile, data in
Europe showed a decline in manufacturing activity. As nervous
investors sought a safe haven in the Swiss Franc, the Swiss
National Bank acted to stem appreciation of the currency by
announcing a floor in the Euro versus Swiss Franc exchange rate.
Later in the month, the five major central banks implemented a
coordinated effort to ease liquidity among European banks. The
European Central Bank ("ECB"), Bank of England and Bank of Japan
all held rates steady during the month, with the ECB also lowering
growth expectations. The Federal Reserve downgraded its economic
outlook and announced a change in policy, known as "Operation
Twist", in which it will sell shorter-term Treasuries and purchase
longer-term Treasuries in an attempt to force long-term interest
rates lower. At the close of the month, worse-than-expected
economic data from China sparked fears of a hard landing which
resulted in a further move away from risk assets.
Equities trended lower at the beginning of the month on the back
of the US unemployment report. The sell-off continued into
mid-month when the situation in Europe deteriorated further, as
Greek GDP fell more than expected in Q2 and fiscally responsible EU
members starting to reconsider the bailout. At mid-month, equity
markets saw a brief respite as the ECB announced, in coordination
with the Fed, the Bank of England, the Bank of Japan and the Swiss
National Bank, that they will lend US Dollars to Eurozone banks to
ensure they have enough US currency through to the end of the year.
However, the downward trend resumed the following week, with a
particularly sharp drop following the "Operation Twist"
announcement, as markets focused on the Fed's negative outlook.
Towards the end of the month, European equities staged a sharp
rally on the back of the optimistic view that European leaders
would take decisive action to tackle their debt crisis. Although
the German parliament eventually passed the enhanced European
Financial Stability Facility ("EFSF"), stocks trended lower on the
back of fears of a hard landing in China. Managers continue to
trade equities tactically, with a bias to the short side, in light
of unfavourable macroeconomic developments. However, they are aware
of the possibility for sharp rebounds to the upside and as such are
tending to avoid structural short positions.
Global bond prices continued to rise in September supported by
safe haven buying and continued accommodative central bank
policies. In the US, the 10-year Treasury yield hit a record low
following the announcement of "Operation Twist", which concurrently
pushed the 2-year yield higher. In Europe, German bund yields fell
to record levels, while peripheral yields continued to widen, led
by Greece, as the country's ability to avoid default remained in
question. As problems in Europe led to increased concerns over the
solvency of European banks, the Euribor-OIS spread, a measure of
European banks' reluctance to lend to each other, rose to the
highest level in over two years. Long fixed income positions
continue to be popular as yield curves in both developed and
emerging markets remain very steep. In the US and Europe, bond
prices are likely to continue to rise as a result of general risk
aversion and subdued growth. Within the fixed income sector,
managers also have long credit protection positions in the
subordinated debt of some European financial institutions.
The foreign exchange sector was driven by risk reduction and
safe haven flows, with the US Dollar and Japanese Yen seeing
significant appreciation. As concerns in the Eurozone grew
considerably, the Euro fell particularly sharply, dropping nearly
7% against the US Dollar. The Euro experienced substantial weakness
against the Swiss Franc, prompting the Swiss National Bank to
intervene and set a floor of 1.20 for the Euro versus Swiss Franc
exchange rate. Risk aversion, coupled with a decline in commodity
prices, also dampened the appeal of commodity and emerging market
currencies. One of the worst performing currencies during the month
was the Brazilian Real, which depreciated by more than 15% against
the US Dollar. As the situation in Europe continues to deteriorate,
managers are increasingly favouring long US Dollar versus short
Euro positions. As uncertainty continues, the US Dollar is likely
to retain its safe haven status. In addition, managers have reduced
their exposure to emerging market and commodity currencies as risk
aversion and a potential global slowdown has reduced the growth
prospects for these economies.
The natural resources sector experienced a sharp downturn in
September, with both commodities and commodity-related equities
posting significant losses. Global macroeconomic uncertainty
continued to drive investor sentiment. The energy sector was
negatively affected by crude oil prices falling by -10.8% amid
concerns about global growth rates, and the subsequent impact on
oil demand. Investor liquidation further added to the sell-off.
Gasoline and natural gas prices also fell sharply, with
energy-related equities hardest hit during the month, many dropping
below their 2008 levels. Concerns about global growth also led to a
drop in base metal prices, with copper falling -24%. Despite often
being perceived as a safe haven, precious metals were likewise
unable to escape the selling pressures. Agricultural commodities
were significantly impacted, largely due to demand concerns,
coupled with a USDA inventory report at month-end indicating higher
inventories than had been expected. Exposure to commodities has
generally been reduced given the recent sell-off and Chinese growth
concerns, which are likely to result in continued volatility and
pressure on commodity prices. However, with much of the speculative
positioning now removed from the markets, the focus should return
to the fundamentals of the individual commodity markets. As
commodity prices fall near or below the cost of production, they
are likely to experience a price floor given the long-term secular
demand story.
Strategy Overview
Discretionary: -1.66%. Managers produced gains during the month
through long exposure to US and German government bonds, as well as
short positions in industrial metals. These profits were offset by
losses for certain managers in the foreign exchange sector. In
particular, shorting the US Dollar against emerging market and
commodity currencies proved particularly detrimental in light of
the sharp declines in these currencies as investors sought safety.
In addition, long positions in local currency-denominated emerging
market bonds were also costly, with the weakness in these bonds
further aggravated by the currency depreciations.
Systematic: +1.96%. Managers within the strategy generally
posted positive returns. Among the trend following managers,
profits were primarily driven by long global fixed income positions
which benefited from the flight to safety, as well as short Euro
and energy positions. The non-trend following managers primarily
benefited from currency trading as short Swiss Franc positions
resulted in particularly strong returns. In addition, commodity
relative value trading was additive to performance. Marginal losses
among the managers were primarily a result of long positions in the
Australian Dollar and long energy trades.
Natural Resources: -9.04%.Managers were impacted across the
board, with the most significant losses arising from long energy
positions. In addition, long exposure to gold equities also proved
detrimental. Losses were only marginally offset by gains generated
through long exposure to commodity volatility.
Relative Value Arbitrage: -3.70%.Performance suffered following
high volatility and an increase in equity correlations, which hit
all time highs during the month. The lack of dispersion among stock
prices dampened relative value opportunities.
Allocation Number of
as of 30 September Managers as Performance by
Strategy % of 30 September Strategy %
-------------------------- -------------------- ----------------- ------------------
September YTD
-------------------------- -------------------- ----------------- ---------- ------
Discretionary(1) 53 22 -1.66 -1.28
-------------------------- -------------------- ----------------- ---------- ------
Natural Resources 9 12 -9.04 -8.54
-------------------------- -------------------- ----------------- ---------- ------
Relative Value Arbitrage 5 3 -3.70 -0.36
-------------------------- -------------------- ----------------- ---------- ------
Systematic(1) 29 12 +1.96 +3.98
-------------------------- -------------------- ----------------- ---------- ------
Cash 4 - - -
-------------------------- -------------------- ----------------- ---------- ------
Total 100 48(1)
-------------------------- -------------------- ----------------- ---------- ------
(1) Discretionary and Systematic have one manager in common.
Strategy returns are in US$, net of underlying manager fees
only, and not inclusive of either Dexion Trading's or Permal
Macro's fees and expenses.
Voting Rights and Capital
The Company's share capital consists of 97,766,896 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/5361Q_-2011-10-20.pdf
This information is provided by RNS
The company news service from the London Stock Exchange
END
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