TIDMDTL
RNS Number : 3651Q
Dexion Trading Limited
14 October 2013
Dexion Trading Limited (the "Company")
September Net Asset Value
The net asset value of the Company's Shares as of 30 September
2013 is as follows:-
GBP Shares
NAV MTD Performance YTD Performance
-------------- ---------------- ----------------
136.04 pence -0.28% +0.70%
-------------- ---------------- ----------------
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 12 March 2008.
Monthly Portfolio Review
Investment Adviser Portfolio Outlook
The Fed's announcement on 18 September that it would continue
its bond-buying programme took many managers by surprise. Clearly
tapering is inevitable, although precisely when is clearly now US
data dependent. However, as a whole, managers are optimistic on US
economic prospects, although a little more cautious in light of the
current political impasse over the debt ceiling. The improving
economic data out of Europe is reflected in managers' views, but
they remain cautious given the political risks and the need for a
prolonged deleveraging, particularly in the banking sector.
Authorities in Japan are likely to maintain their pro-growth
policies which so far have proved beneficial to the economy.
Consequently, managers believe that the fundamentals behind the
'Japan trade' remain intact. While many emerging markets, such as
Turkey, continue to be burdened by deteriorating fundamentals -
high current account deficits, rising inflation and excessive
reliance on foreign capital - others, such as Mexico, are on a much
sounder economic footing. As a result, managers expect there to be
significant dispersion between these markets, offering compelling
investment opportunities on both the long and the short side.
Market Overview
Market sentiment was dominated by politics and policy in
September, including waning geopolitical tension in Syria and the
looming US government shut down. However, it was the Fed's
surprising decision not to taper following months of communication
to the contrary that was most noteworthy. The combination of events
ultimately resulted in a beneficial environment for risk
assets.
Global equity markets finished considerably higher in September.
In the US, equity markets initially advanced on a disappointing
jobs report, which showed the lowest labour force participation
level since 1978, and this alleviated investors' fears that the Fed
would begin to taper its QE program in September. The subsequent
decision by the Fed not to taper, which surprised the markets, led
equities to rally sharply and drove US equity indices to record
highs. Equities also climbed as the likelihood of US military
strikes against Syria diminished. European and Asian equity indices
rose significantly on the 'no tapering' news. Towards month-end,
there was a marginal pullback in global equities amid the political
standoff in Washington and threat of a government shutdown.
Managers have long exposure to developed market equities based on
the improving economic data. In the US, equities are expected to
show resilience despite the current political impasse; in Europe,
the economic climate is improving, which is likely to be reflected
in the equity markets; and in Japan, if 'Abenomics' does continue
to bear fruit, corporate profits will likely improve further.
Following several months of rising yields, government bond
yields declined in September. US yields initially rose on
investors' anticipation of a tapering announcement at the September
FOMC meeting, but, as the month drew on, weaker US economic data
tempered concerns. The Fed's decision not to taper surprised
markets and US yields fell sharply into month-end. UK and European
bonds followed a similar trajectory, although yields in the UK saw
slightly more volatility as the BoE raised third quarter growth
forecasts. In the US, some managers believe that US treasuries are
likely to trade in a relatively tight range in the short term. On
the one hand, the Fed's 'no tapering' announcement has put the
brakes on the back-up in yields. On the other hand, structural
support for bond markets is dissipating as certain participants
(e.g. pension funds) are no longer buying as many government bonds.
In addition, the Fed will eventually scale back its purchases.
Managers are tactically trading US treasuries, but their bias is to
be short as they expect easy US monetary policy to be the first to
reverse compared with other developed markets. In Europe, certain
managers maintain long positions along the euro curve given the
need for continued deleveraging and low inflation. The emerging
market focused managers are finding compelling opportunities in
countries where emerging market credit has sold off
indiscriminately over the past few months and where valuations look
compelling despite the more recent bounce back.
The US dollar depreciated against most global counterparts,
fuelled by hesitation surrounding the direction of US monetary
policy. The exception was the Japanese yen, which moved marginally
lower against the US dollar. Sterling rose to an eight month high
against the US dollar as the BoE raised growth forecasts for the
third quarter and communicated that additional stimulus was not
needed given the stronger data, including an unexpected drop in
unemployment. The Australian dollar climbed against the US dollar
as Australia's second quarter GDP data was stronger. Emerging
market currencies generally strengthened against the US dollar on
the decision not to taper. Managers have, on the whole,
significantly reduced their long US dollar exposure in the short
term in response to the Fed's September announcement. Longer term,
however, they continue to believe that the US dollar will
strengthen against the Japanese yen, as well as certain emerging
market currencies, such as the Turkish lira, which are currently
presenting weaker fundamentals. They are also finding compelling
opportunities to short the euro against other European currencies,
such as the Norwegian kroner, with Norway benefiting from a current
account surplus and a rising inflation rate which makes the
conservative government likely to tighten monetary policy.
In the commodities sector, crude oil prices moved lower as
concerns of US military action in Syria diminished and prospects
for improved relations with Iran grew. Gasoline prices were
significantly lower as the peak summer driving season drew to a
close with a considerable oversupply of transportation fuel.
Natural gas prices fell marginally as US inventories were
larger-than-expected and weather forecasts throughout the US were
mild. Despite gold posting its best quarterly performance since the
third quarter of 2012, prices moved lower on expectations that US
politicians would resolve a political stalemate and avoid a
government shutdown. Copper prices rose for a third consecutive
month as Chinese manufacturing grew. In agricultural commodities,
wheat prices advanced on speculation that China would increase
imports to curb record domestic prices, while corn and soybean
prices fell markedly as estimated yield reports for corn were
better than expected. Whilst light, exposure is generally expressed
through short gold positions and long energy.
Strategy Overview
Discretionary: +0.55%. September was challenging for a number of
the developed market focused managers who had expected at least
some form of tapering by the Fed. As a result, short US treasuries
and long US dollar exposures proved costly. Managers were able to
minimise losses having lowered risk levels ahead of the Fed's
announcement and tactically trading thereafter. In addition, long
exposure to equities helped offset losses. Emerging market focused
managers generally experienced gains during the month from long
exposures to emerging market sovereign bonds which rallied
strongly.
Systematic: -1.94%. Trend followers benefited from the run-up in
equity prices during the month, but gains were offset by losses
from long positions in energy and metals. Among the non-trend
followers, losses came from short positions in the Swiss franc and
the New Zealand dollar, as well as short positions in US fixed
income.
Natural resources: -1.13%. Managers with long positions in gold
and gold-related equities suffered as gold prices reversed during
the month, with further losses from long natural gas and crude
oil.
Relative value arbitrage: -0.37%. Losses in fundamental beta
neutral strategies overwhelmed gains from statistical
arbitrage.
Strategy Allocation Number of Performance by
as of 30 September managers as strategy %
% of
30 September
-------------------------- -------------------- -------------- ------------------
September YTD
-------------------------- -------------------- -------------- ---------- ------
Discretionary(1) 65 20 +0.55 +7.07
-------------------------- -------------------- -------------- ---------- ------
Natural resources 5 9 -1.13 -8.93
-------------------------- -------------------- -------------- ---------- ------
Relative value arbitrage 8 3 -0.37 +8.32
-------------------------- -------------------- -------------- ---------- ------
Systematic(1) 17 7 -1.94 -8.55
-------------------------- -------------------- -------------- ---------- ------
Cash 5 - - -
-------------------------- -------------------- -------------- ---------- ------
Total 100 38(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/3651Q_-2013-10-11.pdf
This information is provided by RNS
The company news service from the London Stock Exchange
END
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