DTL Dexion Trading

TIDMDTL

RNS Number : 5099D

Dexion Trading Limited

29 April 2013

29 April 2013

DEXION TRADING LIMITED

INTERIM MANAGEMENT STATEMENT

This interim management statement relates to the period from 1 January 2013 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 28 March 2013

 
                                                                                                          Sharpe 
                     Q1 2013(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     +2.26%    +2.26%   +2.02%     +0.12%     +1.50%      +4.17%        5.28%           +0.25 
-------------------  ----------  ------  ---------  ---------  ---------  -----------  -----------  ------------------ 
MSCI World Index 
 Gross (TR) 
 (US$)(4)              +7.87%    +7.87%   +12.53%    +6.68%     +9.08%      +5.59%       17.04%           +0.20 
JPM Global Gov't 
 Bond Index (TR) 
 (US$)(4)              -2.80%    -2.80%   -0.64%     +2.47%     +4.33%      +4.38%        6.70%           +0.34 
 

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 (2.86%) for DTL and average of 1M USD LIBOR since November 2004 (2.13%) 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 24 April 2013 was as follows:

 
      NAV        YTD Performance 
 140.17 pence        +3.75% 
 

Investment Adviser's Review: January - March 2013

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: +3.95%

Discretionary managers accounted for 61% of the portfolio at the end of March and experienced a strong quarter. The 'Japan trade', expressed via long Nikkei and Topix index positions versus short the JPY, continued to be a very lucrative trade for the Company's managers over the period. Elsewhere, the 'long US trade' proved rewarding and, in particular, long exposure to not only the S&P 500 but also specific sectors, such as US financials. In the currency sector, the Company's manager's long USD bias against the GBP and the EUR added to returns. In developed world fixed income, profits came from the tactical trading of JGBs and European peripheral bonds. These profits more than offset losses from certain of the Company's emerging market managers' long equity exposures.

Natural Resources: -0.99%

Natural Resources managers accounted for 6% of the portfolio at the end of period. Negative performance during the quarter was driven primarily by long positioning in gold equities which suffered a sharp sell-off in the first two months of the period.

Relative Value Arbitrage: +5.47%

Relative Value Arbitrage represented 7% of the portfolio. Performance was driven by strong returns from all of the Company's underlying managers in this strategy, who successfully capitalised from fundamental long/short stock-picking strategies.

Systematic: +1.00%

Systematic managers accounted for 21% of the portfolio. The Company's trend following managers generally outperformed non-trend following managers during the period, with the bulk of gains coming from the equity and currency allocations amid sustained trends in these sectors. Within equities, the biggest winners were long US and Japanese equities, while currency gains were made from short JPY and long USD positions. Conversely, the sharpest losses among the Company's non-trend following exposures were due to long JPY positions. In addition, the Company's non-trend following managers suffered from mixed positioning in bonds as US treasuries were frequently whipsawed throughout the quarter.

Investment Adviser's Portfolio Outlook

The world economy is healing from the various stresses of the past few years. The major Central Banks have emerged as key and decisive players in the recovery process and have recognised the need to be increasingly proactive. As a result, they are providing unlimited liquidity to the markets, debasing their respective currencies and driving negative real yields. In such an environment, market participants are encouraged to hold long exposure to risk assets as safe-haven asset classes, such as government bonds in the G7, do not represent a compelling source of returns. The unrelenting search for yield will be the driving force supporting risk assets. Hence, even if a slowdown in global growth does occur, its effect on markets is likely to prove a temporary correction.

The main risks to the global economic environment revolve around Europe, which continues to be weighed-down by slowing economic growth and increasing political discontent.

China is also a source of concern, with worries over its slowdown, and even more importantly, the lack of clarity on monetary policy. Other emerging markets represent a mixed bag with certain countries such as Brazil dealing with constraints, for example high inflation, and others such as India aiming to tackle its current account deficit. The shining star among emerging markets is Mexico, benefiting from beneficial political reforms and proximity to the relatively strong US economy.

The US continues to be a cause for optimism, with the economy demonstrating resilience, especially compared to its major global peers.

In Japan, the fight against deflation remains a priority, necessitating additional monetary easing as well as fiscal expansion.

Global macro managers have proved adept at trading the various opportunities brought about by the increased dispersion among the world's economies and we expect that they will continue to do so as the macro investing environment becomes increasingly fertile.

Fixed Income

In the US, while the bias is to be short rates in the 10 year sector, the Company's managers have increasingly embraced tactically trading the US yield curve due to various cross-currents in the asset class. In Europe, the Company's managers are generally maintaining long positioning in European rates and German bonds due to the eurozone's fragile growth outlook. Certain of the Company's emerging market managers believe that the BOJ's actions have unleashed a search for yield on the part of Japanese investors. As these investors tend to be fixed income investors, they will likely seek yield in global fixed income in countries such as Mexico, Russia, South Africa and Columbia. As such, these managers have started initiating long exposures in these regions.

Currencies

Amongst most of the Company's managers, and especially the developed focused managers, long positioning continues to be dominated by being long the USD on the back of relatively positive economic data in the US. The Company's managers maintain shorts in the JPY, but a little more cautiously than previously given the level of depreciation over recent months. They generally hold a short bias towards the EURO in light of the precarious economic situation in the region, periodically aggravated by the political-economic uncertainty. The Company's emerging market focused managers continue to be long currencies with strong supporting fundamentals, such as the MXN.

Equities

The Company's managers maintain their long positioning in Japan and to a lesser extent US equities, due to the continued aggressive policy by the BoJ in the former and relatively strong economic performance in the latter.

Commodities

Commodities exposure remains very light in the Permal Macro portfolio.

Material Events since 1 January 2013

February 2013

Continuation Vote (20 February 2013)

The rolling 12 month discount floor provision for the Company's shares was triggered on 20 February by the discount to estimated NAV during that preceding 12 month period being 11.57%. In accordance with the Company's Articles of Association this required a continuation vote to be proposed by way of ordinary resolution within four months of the discount floor being triggered.

The Company therefore posted a Circular on 4 April advising shareholders that the Board was required to propose the 2013 Continuation Resolution and that a meeting of shareholders would be held at 2.30 pm on 3 May. At that meeting a resolution would be proposed that the Shares continue in issue.

In a subsequent communication to shareholders on 24 April the directors further recommended that, in the event of the Company continuing, an enhanced discount control policy be introduced.

Annual Financial Report (29 April 2013)

The Company, in accordance with DTR 6.3.5, released its Annual Financial Report for the year ended 31 December 2012. The Report is available via www.dexiontrading.com and has been submitted to the National Storage Mechanism and are available for inspection at www.hemscott.com/nsm.do.

Investor Information

The latest available portfolio information can be accessed by eligible Shareholders via www.dexioncapital.com/dtl

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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