TIDMDTL
RNS Number : 4833O
Dexion Trading Limited
19 September 2011
Dexion Trading Limited ("the Company")
August Net Asset Value
The net asset value of the Company's Shares as of 31 August 2011
is as follows:-
GBP Shares
NAV MTD Performance YTD Performance
-------------- ---------------- ----------------
137.94 pence +0.39% -0.17%
-------------- ---------------- ----------------
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
In the US, macroeconomic data was negative during August, with a
fall in consumer spending, lower house prices, declining industrial
activity and a high unemployment rate. Against this backdrop, the
issues surrounding the debt ceiling in the US highlighted the
increased weakness of the US fiscal situation and the continued
political disparities. While many managers viewed the US debt
downgrade as a minor event, it had a significant impact on the
already weakening consumer and business confidence. Managers
believe that while the US will not undergo a double-dip recession,
sub-par growth will persist for a while. Managers are generally
bearish on Europe, where the macroeconomic situation continues to
deteriorate. Data from the peripheral countries is worsening where
austerity measures stand to hamper any growth, and the economic
situation in Germany is also declining. The European Financial
Stability Facility ("EFSF") in its current form, the government
bond purchase programs and the various measures put forward, have
so far not been sufficient to solve the ongoing fiscal issues. More
viable alternatives are required to stimulate growth and increase
revenues. Managers are more optimistic towards emerging markets.
While certain Asian economies have slowed, the larger Asian
economies are likely to continue posting high single-digit growth
this year. In addition, the recent fall in commodity prices will
help to ease Asian inflation, reducing pressures on disposable
incomes and supporting future growth. However, in order to keep
growing they will need to tolerate a certain amount of inflation,
which may in turn cause social unrest.
Market Overview
There were increased macroeconomic challenges during August as
the global economy continued to deteriorate, with the US debt
downgrade, the diverging political views, as well as continued
sovereign debt concerns in Europe. Standard & Poor's downgraded
the US debt rating from AAA to AA+ at the beginning of the month.
In response, and in light of weakening US growth, the Fed pledged
to maintain "exceptionally low levels for the federal funds rate,
at least through mid-2013". Although US economic data continued to
demonstrate weakness throughout the month, Ben Bernanke's month-end
speech in Jackson Hole indicated that the Fed does not anticipate a
recession. The speech lacked any explicit signal that QE3 may take
place, as some had expected. Europe also faced significant
weakness, with France and Germany's Q2 GDP figures lower than
expected, which called into question the notion that core countries
could be the growth engine of Europe. Policymakers made further
attempts to stem the sovereign debt crisis, including buying bonds
from peripheral countries.
Equity markets experienced a sharp increase in volatility at the
start of the month, with global equities falling considerably. This
was initially triggered by a sharper than expected drop in US
manufacturing PMI as well as ongoing turmoil in Europe, and later
falling steadily on the back of the S&P downgrade. European
financials were hit particularly hard amid fears that the region's
debt crisis would spread to France, consequently prompting France,
Italy, Spain and Belgium to impose temporary short-selling bans on
European bank stocks. The short-selling ban, combined with an
encouraging US initial claims report, led to a short-lived rally
half way through the month. Selling resumed the following week with
the release of a disappointing Philadelphia Fed manufacturing
activity report, which fell into negative territory, the lowest
reading since March 2009. In Europe, stocks were once again
impacted as German Q2 GDP came in much weaker than expected.
Towards the end of the month, some of the earlier declines within
the equity markets were offset by a sharp rally on the back of
hopes that the Fed might embark on another round of quantitative
easing. Managers have a bearish view on equities given the
continued economic weakness in the developed world. They expect
volatility in the asset class to remain high for the foreseeable
future and are generally avoiding structural short positions, as
any perceived good news is likely to result in a sharp rally.
Fixed income yields ended August substantially lower, benefiting
from safe haven buying amid the sell-off in risk assets, as well as
the dovish tone of the Fed and European Central Bank ("ECB").
Despite the downgrade, demand for US Treasuries remained high,
largely due to the Fed's commitment to keep yields low for the next
two years. The German benchmark bund yield dropped to a record low
half way through the month as concerns grew amid
worse-than-expected Q2 GDP. Sovereign yields in peripheral Europe
narrowed, with the exception of Greece. Early in the month, the ECB
purchased bonds in an effort to curtail contagion, initially in
Ireland and Portugal, and later extending the program to Spain and
Italy. While the measure resulted in somewhat lower yields, it was
hampered by the German and French reluctance to increase the size
of the EFSF and introduce Eurobonds. Yields in the UK ended
marginally lower as the Bank of England committed to keeping rates
low for an extended period and hinted at additional stimulus, while
yields on Japanese Government Bonds also ended lower amid
expectations for further easing in September. Long fixed income
positions continue to be popular as yield curves in both developed
and emerging markets remain very steep and present attractive roll
down opportunities. In the developed world, central banks have
generally committed to an extended period of accommodative policy.
Although the ECB has recently tightened rates, managers expect
that, much like in 2008, they will have to cut rates sharply to
deal with the rapidly deteriorating environment. Although emerging
markets are likely to experience stronger growth, some managers
believe that rate increases will not be possible given the
constraints of the current global environment.
Currency price action in August was marked by risk aversion,
resulting in substantial safe haven flows into the Swiss Franc and
Japanese Yen. In response to the overwhelming demand, the Swiss
National Bank ("SNB") and Bank of Japan ("BoJ") intervened to curb
appreciation of their respective currencies. The Yen weakened
sharply following the BoJ's intervention, but drifted higher versus
the US Dollar through the remainder of the month. The SNB
experienced more success, with the Swiss Franc steadily
depreciating versus the Euro for most of the month. The US Dollar
was much more volatile versus the Euro as investors struggled to
decide which situation looked bleaker. Higher yielding currencies,
such as the Australian Dollar and Canadian Dollar, weakened as
investors fled risk assets, but regained some of the losses towards
the end of the month. While the US Dollar remains the funding
currency of choice, managers are increasingly bearish on the Euro.
Some managers believe that as the Eurozone runs out of policy
options the likelihood of a break-up is currently higher than the
market is pricing. Asian currencies continue to be attractive as
growth prospects in the region remain far superior to those in the
developed world.
The natural resources sector experienced a volatile month, with
commodities posting muted gains while commodity related equities,
similar to global equities, generated losses. Despite increased
risk aversion, several commodities posted gains given attractive
supply/demand characteristics. Crude oil prices were down during
the month due to uncertainty about global demand going forward,
although towards the end of the month, Brent and WTI crude oil
prices were able to offset some of the losses experienced earlier
in the month. Base metals were also down in August, led lower by
the prospect of slow economic global growth, particularly in
relation to China. The precious metals sector, on the other hand,
continued to experience gains in gold, silver and platinum. Gold
continued to be the biggest beneficiary of economic uncertainty,
gaining +12.3%, and continued to be driven by weak reserve
currencies, accommodative monetary policy, low interest rates,
central bank purchases and strong investor demand. Given the
increase in the price of gold, gold-related equities posted strong
gains. Agricultural commodities also generated positive returns, as
attractive supply/demand fundamentals drove prices higher. In
particular, production estimates for this year's harvest continued
to be revised lower given poor weather conditions in the US, with
corn, wheat and soybeans all appreciating considerably. Managers
expect continued volatility from the commodities sector in the near
term as global macroeconomic challenges will remain at the
forefront of investors' minds. Despite this, underlying
fundamentals for commodities continue to be supportive, as growth
in developing markets remains strong amidst a backdrop of
constrained supplies. Additionally, investor demand for hard
assets, due to weak reserve currencies, will prove beneficial for
the sector.
Strategy Overview
Discretionary: +0.63%. Certain discretionary managers shifted to
a more defensive positioning in light of increased economic and
political uncertainty, as well as increased volatility in the
markets. Many managers increased their long US government bond
exposure, a move that proved particularly beneficial during the
month. Gains were widespread across asset classes. In addition to
long exposure to US Treasuries (in particular the 10-year bond),
managers profited from long exposure to Mexican, German and UK
bonds. Exposure to commodities contributed positively to returns,
largely due to long positions in gold. Managers' negative bias
towards equities, in particular developed market equities, also
contributed to gains.
Systematic: +1.31%. Returns were widely dispersed among
underlying managers. Within the trend following allocation,
managers with significant long allocations to bonds and interest
rates profited from the sustained appreciation throughout the
month. Long positions in precious metals also proved beneficial as
gold prices continued to reach new highs. Conversely, managers with
long positions in equities suffered amid highly volatile price
action. Non-trend following managers experienced mixed returns.
Managers with short Swiss Franc positions profited, while long
positions in commodity currencies, such as the Australian Dollar
and Canadian Dollar, resulted in losses.
Natural Resources: -1.80%.The most pronounced losses came from
long positions in basic industry related equities as well as long
positions in oil service related companies. Losses were partly
offset by long positions in gold mining equities. In addition, long
positions within agricultural commodities, in particular corn and
wheat, contributed positively to performance.
Relative Value Arbitrage: -1.38%.Performance was affected by the
underperformance of long positions versus short positions amidst
the significant sell-offs that occurred throughout the month.
Allocation Number of
as of 31 August Managers as Performance by
Strategy % of 31 August Strategy %
------------------------ ----------------- -------------- -----------------
August YTD
------------------------ ----------------- -------------- --------- ------
Discretionary(1) 51 22 +0.63 +0.38
------------------------ ----------------- -------------- --------- ------
Natural Resources 10 12 -1.80 +0.55
------------------------ ----------------- -------------- --------- ------
Relative Value
Arbitrage 5 3 -1.38 +3.47
------------------------ ----------------- -------------- --------- ------
Systematic(1) 28 12 +1.31 +1.99
------------------------ ----------------- -------------- --------- ------
Cash 6 - - -
------------------------ ----------------- -------------- --------- ------
Total 100 48(1)
------------------------ ----------------- -------------- --------- ------
(1) 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 97,861,635 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/4833O_-2011-9-19.pdf
This information is provided by RNS
The company news service from the London Stock Exchange
END
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