DTL Dexion Trading

TIDMDTL

RNS Number : 0405R

Dexion Trading Limited

28 October 2011

28 October 2011

DEXION TRADING LIMITED

INTERIM MANAGEMENT STATEMENT

This interim management statement relates to the period from 1 July 2011 to the date of publication of this statement and has been prepared solely to provide additional information in order to meet the relevant requirements of the UK Listing Authority's Disclosure and Transparency Rules, and should not be relied on by Shareholders, or any other party, for any other purpose.

This statement provides:

1. An explanation of material events and transactions that have taken place during the period under review and their impact on the financial position of the Company; and

2. A general description of the financial position and performance of the Company during the period under review.

Overview

Dexion Trading Limited is a Guernsey authorised, closed-ended investment company listed on the main market of the London Stock Exchange under the Premium listing regime. The Company is a feeder fund into Permal Macro Holdings Ltd ("Permal Macro"), and, as such, the Company's investment objective and policy mirror that of Permal Macro. Permal Macro's current investment objective is to provide investment returns that have a lower risk than traditional investment returns and, over time, to achieve returns above those of the market. The Permal Macro asset allocation policy is currently structured so as to target an annualised return over the medium term of approximately 8% to 12% with annualised volatility of 4% to 6% (although the Investment Adviser may alter this allocation policy at any time at its sole discretion without reference or notification to the Company).

NAV performance as of 30 September 2011

 
                                                                                                           Sharpe 
                      Q3 2011(1)  YTD(1)   12m(1,2a)  24m(1,2a)  36m(1,2a)  Ret(1,2b,5)  Vol(1,2b,5)   Ratio(1,2b,3,5) 
Dexion Trading NAV      -0.10%    -1.77%    +0.93%     +2.50%     +4.61%      +4.84%        5.55%           0.27 
--------------------  ----------  -------  ---------  ---------  ---------  -----------  -----------  ---------------- 
MSCI World Index 
 Gross (TR) (US$)(4)   -16.52%    -11.82%   -3.84%     +1.58%     +0.50%      +2.22%       17.64%          -0.02 
JPM Global Gov't 
 Bond Index (TR) 
 (US$)(4)               +3.06%    +7.07%    +5.16%     +5.72%     +8.41%      +5.59%        7.20%           0.42 
 

Source: Dexion Capital plc (calculation), Bloomberg (data)

1 NAV performance data is net of all fees and expenses. DTL invests solely in Class A GBP Shares in Permal Macro, which shares are hedged into Sterling at the PMH level. Returns on the GBP Shares are shown with the effect of such currency hedging which had a negative effect on the NAV performance of the GBP Shares over the period.

   2      a) Annualised for stated period, and based on monthly data. 

b) Annualised from inception of DTL, November 2004, and based on monthly data.

3 Risk free rate is average 1M GBP LIBOR since November 2004 (3.34%) for DTL and average of 1M USD LIBOR since November 2004 (2.54%) for US$ indices.

4 MSCI World Index and JPM Global Gov't Bond Index are US$ indices to which no currency hedging is applied.

5 On 1 October 2007 DTL became a feeder fund of Permal Macro. Prior to this date DTL had a different investment objective and policy and was managed by FRM Investment Management Limited. Accordingly, performance figures prior to 1 October 2007 may not be indicative of or relevant to DTL's performance as it is currently constituted.

The information in this table has not been subject to audit.

The statistics shown in the table above are for illustrative purposes only and do not represent forecasts of returns or volatility.

The latest available and published estimated NAV and YTD performance as of 25 October 2011 was as follows:

 
      NAV        YTD Performance 
 135.71 pence        -1.79% 
 

Investment Adviser's Review: July - September 2011

References to the Portfolio are, where the context requires, to the portfolio of Permal Macro, of which the Company is a feeder fund.

Performance by Strategy

Discretionary

Discretionary managers accounted for approximately 53% of the Portfolio Assets under Management ("AUM") as at 30 September 2011. During the quarter, managers profited from long positions in US and German government bonds, as well as long positions in gold early in the period. However, gains were erased in September as certain managers within the strategy suffered from steep losses in long emerging market currency positions, with core holdings such as the Mexican peso and Brazilian real falling by 11% and 15%, respectively against the US dollar. Losses were further exacerbated due to long positions in local-currency denominated Emerging Market bonds.

Natural Resources

Natural Resources managers accounted for approximately 9% of Portfolio AUM. Despite solid profits in July due to long gold, equity and crude oil positions, these managers suffered dramatic losses in September. Losses were spread across all sectors of the commodity complex with some of the worst performances coming from long positions in commodity related equities. Longs in platinum and palladium, as well as longs in energy commodities also contributed to the losses.

Relative Value Arbitrage

Relative Value Arbitrage represented approximately 5% of Portfolio AUM. The bulk of losses in this allocation came in September as US equity correlations rose to all time highs, diminishing relative differences in performance among stocks. In addition, those managers who focus on fundamentals suffered as equities generally fell in tandem regardless of the performance of the underlying companies.

Systematic

Systematic managers accounted for approximately 29% of Portfolio AUM. The Systematic allocation profited steadily throughout the quarter, benefiting from the diversification between trend following and non-trend following managers. Trend following managers successfully captured the rise in fixed income prices throughout the period. In addition, long precious metals positions also added to returns, particularly during July and August, though some gains were offset by long equity positions. Non-trend following managers posted gains primarily due to currency positions and commodity relative value trades. One of the most profitable trades during the quarter was a short position in the Swiss franc. Although costly in July, the position bounced back strongly following the Swiss National Bank's intervention.

Investment Adviser Portfolio Outlook

In general, the Company's managers have a negative outlook on the global economy, with most of the bearishness centred on Europe as problems at the periphery continue to be unresolved and 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 huge budget deficits. Within emerging markets, managers are now questioning the probability of a hard landing in China. In general, the outlook for emerging markets is less positive as it will be challenging for them to do well when their two largest customers, the US and Europe, are suffering.

Managers' positioning by asset class as at 30 September 2011 is described below. Key in their minds is to remain nimble and flexible and shift their portfolios as appropriate in a highly proactive fashion.

Fixed Income

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 keep rising as a result of general risk aversion and subdued growth. Within the fixed income sector, managers also have long credit protection positions on the subordinated debt of some European financial institutions.

Currencies

As the situation in Europe continues to deteriorate managers are increasingly favouring long dollar versus short euro positions, especially in the short-term. As uncertainty continues, the dollar is likely to retain its safe haven status. In addition, though managers generally retain a long-term bullish view on emerging market and commodity currencies, many have reduced their exposure to these currencies as a result of the strong risk aversion that took place in September coupled with fears of a potential global slowdown.

Equities

Managers continue to trade equities tactically. Some managers have a short bias in light of unfavourable macroeconomic developments. However, they are cognisant of the possibility for sharp bounces to the upside and as such tend to avoid structural short positions. Others believe that September's sharp market correction may have provided a bottom for the asset class and thus have established long exposure, particularly in the US.

Commodities

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.

Material Events since 1 July 2011

August 2011

Half Yearly Report (25 August 2011)

The Company, in accordance with DTR 6.3.5, released its Interim Unaudited Financial Report for the six months ended 30 June 2011. The Report is available via www.dexiontrading.com and the National Storage Mechanism and available for inspection at www.hemscott.com/nsm.do.

Buybacks during the period

During the period the Company has purchased in aggregate 1,673,153 of its GBP shares of no par value at an average price per share of 123.50p.

Investor Information

The latest available portfolio information can be accessed by eligible Shareholders via www.dexioncapital.com/index.php/dexion-products/dexion-trading

Enquiries:

Chris Copperwaite

Dexion Capital (Guernsey) Limited

Tel: + 44 (0) 1481 743940

End of announcement

This information is provided by RNS

The company news service from the London Stock Exchange

END

IMSGCBDGDDDBGBI