DTL Dexion Trading

TIDMDTL

RNS Number : 6242B

Dexion Trading Limited

18 April 2012

18 April 2012

DEXION TRADING LIMITED

INTERIM MANAGEMENT STATEMENT

This interim management statement relates to the period from 1 January 2012 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 March 2012

 
                                                                                                          Sharpe 
                    Q1 2012(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    +1.15%    +1.15%    -1.74%     +1.25%     +4.22%      +4.47%        5.43%            0.24 
------------------  ----------  -------  ---------  ---------  ---------  -----------  -----------  ------------------ 
MSCI World Index 
 Gross (TR) 
 (US$)(4)            +11.72%    +11.72%   +1.14%     +7.39%     +20.90%     +4.68%       17.62%            0.13 
JPM Global Gov't 
 Bond Index (TR) 
 (US$)(4)             -0.91%    -0.91%    +5.67%     +6.91%     +6.55%      +5.09%        7.03%            0.38 
 

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 (3.17%) for DTL and average of 1M USD LIBOR since November 2004 (2.39%) 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 10 April 2012 was as follows:

 
      NAV        YTD Performance 
 135.37 pence        +1.12% 
 

Investment Adviser's Review: January - March 2012

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 account for 50% of the Fund's AUM. The vast majority of managers posted gains over the period with profits led by longs in US and Japanese equities. In fixed income, shorting US Treasuries also contributed strongly particularly in the month of March when these bonds sold off aggressively. In the currency sectors, shorting the Japanese yen proved a lucrative trade for many discretionary managers while small shorts in the euro caused minor losses. In commodities, positive performance came from longs in oil and gold especially at the beginning of the quarter, although the long gold exposure subsequently detracted marginally from returns. Shorts in natural gas also added to gains. After solid profits in January and February, emerging markets focused managers gave back some gains from their long currency exposures but still managed to finish the quarter in positive territory.

Natural Resources

Natural Resources managers account for 9% of AUM. Strong returns in January and February were only marginally offset by March's losses. The primary drivers of performance during the quarter were long positions in gold and gold equities, which was beneficial early in the period, but detracted in the second half. Longs across the agricultural complex and in energy were also beneficial.

Relative Value Arbitrage

Relative Value Arbitrage represents 5% of AUM. Managers posted moderate returns early in the period, benefiting from lower equity correlations.

Systematic

Systematic managers account for 30% of AUM. Systematic managers posted small gains in January and February, but profits were erased due to a difficult March. In the first part of the quarter, managers profited from long exposure to commodity based currencies, particularly the Australian and Canadian dollar, as well as long positions in US and German fixed income. Long positions in equity indices also produced positive performance. However March saw violent fluctuations which caused sharp losses for trend-following and non-trend following managers alike. Currency positions proved the most detrimental, with losses due to long positions in the Japanese yen and commodity based currencies. In addition fixed income proved difficult given the large back-up in government bond yields at mid-month.

Investment Adviser Portfolio Outlook

Although the Company's discretionary managers' views are dominated by their belief that US growth will continue to outperform on both a relative and absolute basis, especially in the short-term, the disappointing March payroll report has added a note of caution. Longer-term, they warn that caution must also be exercised in light of possible fiscal tightening in 2013.

In Europe, the Company's managers note that many familiar problems remain. A weak Spanish debt auction in April 2012 in particular served as a sobering 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 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 lesser extent, in commodities.

Fixed Income

Shorting US Treasuries has proved to be a significant driver of profits for many of the Company's discretionary managers so far in 2012 and some continue to hold this short bias in light of the strong economic environment in the US. Certain of the Company's managers however have very recently taken a "wait-and-see" stance as they evaluate whether Chairman Bernanke may adopt a more accommodative policy stance in light of the disappointing March employment report and have indicated that, in such a case, they may go long US bonds if only in the short-term. They also have some small shorts in Japanese Government Bonds as the fiscal situation in Japan continues to worsen. Emerging-markets focused managers have shifted their portfolios from primarily being 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 shorts in short-dated Indian and Korean bonds, while being long longer-dated South African and Mexican bonds and short-dated Brazilian bonds.

Currencies

The Company's managers hold short exposures to the Japanese yen in light of the deterioration of the trade balance and declining interest rates. The Company's managers also have small shorts in the euro given the continued problems in the region. Many of the Company's managers have also traded the Australian dollar tactically and often on the short-side as data in the region has been weak. They hold long positions in emerging market currencies, in particular those they believe will benefit from US outperformance (e.g., Mexican peso and Canadian dollar).

Equities

The Company's managers are expressing their positive view on the US by being long US equity indices, in particular sectors such as housing, financials and global cyclical companies, which are selling to a more robust 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.

Commodities

Commodity exposure continues to be dominated by long exposure to oil in light of geopolitical tensions. To a lesser extent, they also have long positioning in gold.

Material Events since 1 January 2012

The rolling 12 month discount floor provision for the Company's shares was triggered on 20 February 2012 which required the Board to put forward a Continuation Resolution. At a Class Meeting held on 21 March 2012 the Continuation Resolution was passed as follows:

 
 Total Shares voted (%    Votes cast in favour (%   Votes cast against 
  issued share capital)       cast in favour)         (% cast against) 
-----------------------  ------------------------  -------------------- 
  56,095,138 (58.60%)       40,448,978 (72.11%)     15,646,160 (27.89%) 
 

The Board thanked those Shareholders who voted in favour of continuation for their support.

Buybacks during the period

During the period the Company has purchased in aggregate 1,275,000 of its GBP shares of no par value at an average price per share of 118.05p.

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

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