TIDMDTL
RNS Number : 2964B
Dexion Trading Limited
13 April 2012
Dexion Trading Limited ("the Company")
March Net Asset Value
The net asset value of the Company's Shares as of 30 March 2012
is as follows:-
GBP Shares
NAV MTD Performance YTD Performance
-------------- ---------------- ----------------
135.41 pence -1.15% +1.15%
-------------- ---------------- ----------------
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 ("PMH") Class A shares
provided by PMH. The Investment Adviser and third party service
providers to PMH, rely on estimates of the value of Underlying
Funds in which PMH 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 PMH 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 PMH 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 PMH'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
Discretionary managers still believe that US growth will
continue to outperform on both a relative and absolute basis,
especially in the short-term. They have, however, expressed some
caution recently in light of the disappointing March employment
report. Longer-term, they warn that caution must also be exercised
in light of possible fiscal tightening in 2013. In Europe, a weak
Spanish debt auction in early April, in particular, served as a
reminder that the European periphery continues to struggle and may
reignite concerns of slowing global growth. After running low
levels of risk throughout most of 2011, the level of risk-taking
amongst discretionary managers has increased notably in 2012. They
hold much higher conviction levels in their thematic trades and are
expressing the majority of their risk in fixed income, currencies
and equities and, to a much lesser extent, in commodities. After a
solid first quarter, where profits were generated from the risk-on
trade, many managers held on to these profits given the
weaker-than-expected March 2012 job report, which they thought
could be a turning point in what has been a strong US economic
picture.
Market Overview
During March, markets fluctuated amid mixed economic data. The
month began with China announcing that it was reducing its annual
GDP growth forecast to 7.5%, prompting investors to re-evaluate
global growth prospects. In the US, data showed that the US
recovery remains intact with a better-than-expected February
employment report, as well as upward revisions to the December and
January figures. The Federal Open Market Committee ('FOMC')
indicated mid-month that the outlook for the US economy was
improving, while the results of its banking stress tests were
generally favourable, with 15 out of 19 banks sufficiently
capitalised. In Europe, although private sector involvement in the
Greek debt-swap proved successful, data continued to be weak with
renewed doubts over the health of peripheral countries and
disappointing PMI data.
Global equities were mixed in March as the risk rally that began
at the start of the year began to lose steam. Early in the month,
increased fears over the EU debt crisis and the Chinese decision to
lower their growth target for the first time in eight years
resulted in a sharp drop in equity prices, particularly in Europe.
Stocks, however, recovered quickly as Greece successfully
restructured its debt and the US posted yet another encouraging
employment report. Equities were further boosted by the mid-month
FOMC statement, which noted an improved outlook for the US economy.
While US equities generally continued to trend higher, equities in
Europe and Asia posted sharp losses amid signs of an economic
slowdown in China and the eurozone. Japanese equities generally
posted strong performance throughout the month as the weakening
Japanese yen proved favourable for the export sector, while
non-Japan Asia equities suffered on the back of Chinese growth
concerns. Managers are expressing their positive view on the US via
long positions in US equity indices, in particular sectors such as
housing, financials and global cyclical companies, which are
selling to a much stronger US consumer. Risk in the equities space
is also dominated by being long Japanese equities as Japanese
exporters will be supported by a weaker yen.
Government bond prices generally declined in March. Prices were
steady through the first part of the month; however, following
persistently strong data from the US and comments from the FOMC
acknowledging an improved outlook, 10-year US Treasuries sold off
sharply, with yields rising to their highest level in four months
as investors reduced bets on a potential third round of
quantitative easing. Yields drifted lower into month-end on the
back of disappointing US housing reports and comments from Chairman
Bernanke indicating caution over the sustainability of the recent
pace of improvement in the labour market. The 10-year UK Gilt and
German Bund generally followed a similar path throughout the month.
With the exception of Greece, yields in the periphery were
relatively stable in March. Greece successfully used a collective
action clause to push through the biggest sovereign restructuring
in history, getting private investors to forgive more than EUR100
billion of debt. The new Greek bonds, however, declined almost
immediately after trading began as investors remained concerned
about the nation's ability to reduce its debts, even after eurozone
officials signed off on an additional EUR130 billion bailout
program. Shorting US Treasuries has proved to be a significant
driver of profits for many discretionary managers so far in 2012
and many continue to hold this short bias in light of the strong
economic environment in the US. Some, however, have very recently
taken on a "wait-and-see" approach to evaluate whether Chairman
Bernanke may adopt a more accommodative policy stance in light of
the disappointing March employment report and have indicated that,
for this reason, they may take long US bond positions for the short
term. They also have some small short positions in Japanese
government bonds as the fiscal situation in Japan continues to
decline. Emerging markets-focused managers have shifted their
portfolios from being primarily long emerging market bonds to being
long and short as they believe the market is currently pricing in
too many rate cuts in certain countries. As such, they hold short
positions in short-dated Indian and Korean bonds, while being long
longer-dated South African and Mexican bonds and short-dated
Brazilian bonds.
Currency price action was highly volatile during the month, with
the US dollar ending lower versus the euro and sterling, and higher
versus the Japanese yen. During the first half of the month,
however, the US dollar trended higher versus the euro on the back
of increased uncertainty in the eurozone and positive US economic
data. However, the trend reversed around mid-month and the euro
advanced as US inflation expectations declined and negative housing
news weighed on the US dollar. The latter continued to advance
steadily versus the yen, supported by the rally in US yields and
soft data from China. Emerging market currencies generally weakened
versus the US dollar amid fears of a hard landing in China. The
Australian dollar fell significantly on the back of concerns of a
pending rate cut at the next central bank meeting. The Brazilian
real was one of the worst performing currencies during the month,
falling nearly 6% versus the US dollar as the central bank cut its
benchmark rate by 75bps, more than the expected 50bps, as concerns
increased over slow economic growth. Managers also have short
exposures to the Japanese yen in light of the deterioration of the
trade balance and declining interest rates. Many continue to hold
short positions in the euro given the continued problems in the
region. Managers have also traded the Australian dollar from the
short side as the data has been weak. They hold long positions in
emerging market currencies, in particular those they believe will
benefit from US outperformance (e.g. the Mexican peso and Canadian
dollar).
The natural resources sector reversed course in March, with most
commodities and commodity-related equities registering losses.
Despite increasingly positive data in the US, commodity prices
largely moved lower from fears of an economic slowdown throughout
the eurozone and China, and the subsequent prospects for global
growth. The energy sector, with the exception of gasoline, moved
broadly lower in March. Brent crude oil was essentially flat as
diminished spare capacity and geopolitical risks tied to Iran were
offset by mild weather and intermittent news reports of a potential
release of oil from the strategic petroleum reserves. WTI crude oil
prices ended the month considerably lower, down 3.8%, largely the
result of building inventories. Gasoline prices surged, up 11.4%,
following decreased East Coast refining capacity ahead of the peak
driving season, while uncharacteristically high US natural gas
inventories and mild weather drove prices to 10-year lows.
Industrial and precious metals prices ended the month lower with
gold prices declining 2.5% as inflationary concerns fell on the
back of decreased expectations for additional monetary easing in
the US, while precious metals-related equities experienced a
sharper drop in prices. Base metals declined on the back of
weakness in the Chinese and European manufacturing sectors. Within
the agricultural sector, soybeans was once again the month's best
performer, largely due to the result of a USDA report which led
many to speculate that projected corn acreage would increase at the
expense of the commodity. Commodity exposure continues to be
dominated by long positions in oil given the various geopolitical
tensions. To a lesser extent, managers also continue to hold long
positioning in gold.
Strategy Overview
Discretionary: +0.21%. Performance varied significantly among
managers. Profits were generally driven by the fixed income sector,
where managers benefited from short exposure to US bonds, which
sold off given the continued economic improvement in the US.
Equities were modestly profitable, with managers holding long
positions in US and Japanese equities. Managers with a bias to
emerging markets, however, fared worse. Losses among discretionary
managers were centred on currency trading. Long positions in
emerging market and commodity currencies were particularly
detrimental. Smaller losses were registered from long exposures to
gold and oil.
Systematic: -3.58%. March was an extremely difficult environment
for systematic managers given the low volatility environment,
coupled with frequent moves from risk-on to risk-off. In
particular, most of the losses among systematic managers derived
from currency positions, in particular, long positions in the
Japanese yen and in commodity currencies. Fixed income trading also
proved to be detrimental for these managers given the large back-up
in yields at mid-month. Managers with longer holding periods were
generally able to better tolerate the frequent intra-month
reversals.
Natural Resources: -1.52%.Long positions in gold equities were
the biggest contributor to negative returns, illustrated by the
Philadelphia Stock Exchange Gold & Silver Index declining by
more than 10%.
Relative Value Arbitrage: -0.44%.Managers suffered during the
month as volatility and correlation remained stable at medium/low
levels during the month.
Number of
Allocation Managers as
as of 30 March of Performance by
Strategy % 30 March Strategy %
-------------------------- ---------------- ------------- -----------------
March YTD
-------------------------- ---------------- ------------- -------- -------
Discretionary(1) 50 21 +0.21 +3.10
-------------------------- ---------------- ------------- -------- -------
Natural Resources 9 11 -1.52 +5.04
-------------------------- ---------------- ------------- -------- -------
Relative Value Arbitrage 5 3 -0.44 +1.22
-------------------------- ---------------- ------------- -------- -------
Systematic(1) 30 13 -3.58 -1.58
-------------------------- ---------------- ------------- -------- -------
Cash 6 - - -
-------------------------- ---------------- ------------- -------- -------
Total 100 47(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 PMH's fees
and expenses.
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/2964B_-2012-4-13.pdf
This information is provided by RNS
The company news service from the London Stock Exchange
END
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