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RNS Number : 8757T
Dexion Trading Limited
13 December 2011
Dexion Trading Limited ("the Company")
November Net Asset Value
The net asset value of the Company's Shares as of 30 November
2011 is as follows:-
GBP Shares
NAV MTD Performance YTD Performance
-------------- ---------------- ----------------
134.30 pence -0.75% -2.81%
-------------- ---------------- ----------------
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
Given the continued weaknesses in the macroeconomic landscape,
managers generally remained cautious during November. Developed
countries still need to undergo significant fiscal adjustments,
actions which will have an impact on growth. Lower global growth,
in turn, will exacerbate the solvency problems for many European
countries where much of the pessimism lies. The concerted action on
November 30 by major central banks alleviates strains on the
financial markets and represents a positive step towards recovery;
however, it fails to address the longer-term structural economic
problems faced by developed economies, especially Europe and to a
lesser extent the US. In addition, some managers question the
motivation behind the central banks' action, noting that it could
be indicative of further underlying problems. In Europe, there was
an increased chance of recession given the political uncertainty,
weakening growth and lack of a credible, comprehensive solution to
the sovereign debt problem. The US fared relatively better with
surprising data on the upside which proved the economy to be much
stronger than it was thought. There are, however, threats to this
upside, given the ongoing political issues in the US and the
pressures from Europe, which could deteriorate further. Managers
with an emerging markets focus maintained a more constructive
outlook on emerging markets, which they believe will outperform
their developed world counterparts. In their opinion, policymakers
in many of the emerging countries will react to the risk of a
global slowdown by cutting interest rates. Managers generally
maintain a defensive portfolio positioning, although some have, and
will continue to, shift their portfolios towards a more bullish
stance in order to take advantage of short-term relief rallies in
the markets. Risk levels are generally low at present as
significant tail risks remain.
Market Overview
Developments in Europe continued to dominate the macroeconomic
environment during the month. Markets experienced steep declines
early on as a result of continued concerns over the ongoing fiscal
crisis in the region. The market sell-off was caused by the threat
of a Greek referendum and its implications for the enhanced
European Union bailout package. The political landscape also
experienced turmoil with three new governments formed, in Italy,
Greece and Spain. Risk appetite rebounded briefly half way through
the month upon the resignation of Italy's prime minister and the
approval of an austerity package. Global markets, however, resumed
their decline in light of rising yields in the region, with Italy's
borrowing costs rising to Euro-era highs. Very low demand at a
German bund auction, which took place on 23 November 2011, also
raised concerns that Germany was being affected by the crisis. Over
the course of the same week, Standard and Poor's cut Belgium's
credit rating to AA from AA+, with the agency expressing concerns
about funding and market pressures; Moody's downgraded Hungary's
debt to 'junk' status; and Fitch did the same with regard to
Portugal's debt. US equity markets posted their worst Thanksgiving
week loss since 1932 with the S&P 500 falling nearly 5%. The
inability in the US of the congressional 'Super Committee' to come
up with a proposal for deficit reduction only added to investor
unease and market uncertainty. Positive economic data from the US,
including upwardly revised fourth quarter GDP growth forecasts, did
little to alleviate market fears. As the month came to a close, in
a coordinated and unexpected move, global central banks eased
funding and liquidity concerns by lowering the cost of US Dollar
lending. The move was widely accepted by world equity markets and
risk assets surged, recuperating some of the losses they incurred
throughout the month.
Despite a surge at the end of November, world equity markets
fell amid unrelenting concerns over the Eurozone crisis. The
S&P 500 (with dividends reinvested) fell 0.2%, while the MSCI
Europe (in US Dollars) was down 4.5%. In Japan, the Nikkei fell
6.2%. Emerging market stocks fared even worse with the Hang Seng
China Enterprises (H-Shares) declining 9.6% and the MSCI AC Asia
Pacific was down 6.6%. While exposure to this asset class is not
significant, managers are generally trading equities with a short
bias given the unfavourable macro challenges. However, they are
aware of the fact that the markets may experience short-term
bounces and are willing to switch their portfolios towards a more
bullish stance in order to capitalise on any such rallies.
In the US, bonds rose early in the month boosted by safe-haven
demand in light of the ongoing drama in Europe and increased market
volatility. While 10 year US Treasuries finished the month with
small gains, shorter dated bonds ended the month lower on the back
of the risk rally at month-end. In Europe, German bonds fell
sharply, with the move further affected by the poor bund auction.
In the UK, 10 year Gilts rose as investors sought safety and
maintained their gains despite the late month surge in risk
appetite. Managers are illustrating their pessimism on the Eurozone
through long positions along the Euro curve, especially at the
front-end. Some also hold protection on the sovereign debt of
certain central and eastern Europe nations. In addition, some
managers hold long positions in UK government bonds. Emerging
markets focused managers hold long positions in certain emerging
market bonds, such as Mexico and Brazil.
Despite a late month rally, a notable movement in the currency
space was the decline in the Euro, which fell in the midst of
Eurozone sovereign debt concerns and sustainability of the
currency. The flight to safety benefited the US Dollar which rose
against many of its global counterparts, including the Euro,
Sterling, the Swiss Franc and several emerging market and commodity
currencies. Managers are maintaining a bearish stance on Europe by
holding short Euro positions versus the US Dollar and certain
emerging market currencies. While sovereign debt concerns continue
to plague the Euro, the deteriorating global economic picture
should be favourable for the US Dollar. For many managers, a
compelling risk/reward currency trade in Europe is long the Euro
versus the Swiss Franc in light of the Swiss National Bank's
commitment to maintain the peg and its view that the Swiss Franc
remains overvalued.
The energy sector experienced mixed results. Natural gas prices
fell on the back of unseasonably warm temperatures, as well as
increased supplies. WTI crude oil prices rose, finishing the month
at over US$100/barrel, due largely to an announcement that the
Seaway pipeline, connecting the Gulf Coast to Cushing, Oklahoma,
will be reversed next spring, allowing the excess oil locked in
Cushing to flow south and therefore reduce the mid-continent
surplus. As a result of this news, the premium between Brent crude
oil and WTI crude oil narrowed dramatically in November.
Agricultural commodities declined following decreasing demand for
certain agricultural goods. The metals sector experienced mixed
results, with gold finishing the month with gains, while copper
declined. Exposure to commodities remains generally minimal with a
long bias towards gold which will continue to be supported by
macroeconomic uncertainty. Global macroeconomic concerns are likely
to persist for the remainder of the year and into 2012,
particularly in Europe. Commodity prices are likely to be subject
to increased volatility in this environment. Thus, while the
long-term secular demand story remains intact, the Portfolio's
managers will continue to tactically trade the asset class given
the short-term volatility.
Strategy Overview
Discretionary: -0.84%. While managers generated gains in the
first half of the month, bearish positioning proved costly amid the
risk asset rally that took place at the end of the month. Within
the currency sector, short positions in the Euro versus the US
Dollar and long positions in the Euro versus the Swiss Franc were
the most significant contributors to performance. However, gains
were offset by long exposure to emerging market and commodity
currencies. Emerging markets focused managers within the
discretionary strategy fared the worst, with losses deriving
largely from their long emerging market currency exposures but also
from long positions in certain emerging market bonds such as
Mexico. Gains from short equity positions, namely in the S&P
500, were tempered by the strong equity market recovery in the last
couple of days of the month.
Systematic: -0.47%. Results were mixed among trend following and
non-trend following managers and, in aggregate, systematic managers
suffered losses during the month. The trend following managers were
affected by sharp reversals in equity indices and in global
government bonds at the end of the month. Certain non-trend
following managers suffered as a result of their long exposure to
the Australian Dollar.
Natural Resources: +0.74%.Gains from long exposures to oil and
gold offset losses from long positions in agricultural
commodities.
Relative Value Arbitrage: -1.82%.Negative performance derived
from exposure to equities, which declined at the beginning of the
month.
Number of
Allocation Managers as
as of 30 November of Performance by
Strategy % 30 November Strategy %
-------------------------- ------------------- ------------- -----------------
November YTD
-------------------------- ------------------- ------------- --------- ------
Discretionary(1) 52 22 -0.84 -1.57
-------------------------- ------------------- ------------- --------- ------
Natural Resources 9 12 +0.74 -5.32
-------------------------- ------------------- ------------- --------- ------
Relative Value Arbitrage 5 3 -1.82 +0.21
-------------------------- ------------------- ------------- --------- ------
Systematic(1) 29 12 -0.47 +0.98
-------------------------- ------------------- ------------- --------- ------
Cash 5 - - -
-------------------------- ------------------- ------------- --------- ------
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.
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/8757T_-2011-12-13.pdf
This information is provided by RNS
The company news service from the London Stock Exchange
END
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