DTL Dexion Trading

TIDMDTL

RNS Number : 4035Q

Dexion Trading Limited

14 October 2013

14 October 2013

DEXION TRADING LIMITED

INTERIM MANAGEMENT STATEMENT

This interim management statement relates to the period from 1 July 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 30 September 2013

 
                                                                                                          Sharpe 
                    Q3 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    -2.23%    +0.70%    +1.42%     +0.11%     +0.39%      +3.75%        5.24%           +0.20 
------------------  ----------  -------  ---------  ---------  ---------  -----------  -----------  ------------------ 
MSCI World Index 
 Gross (TR) 
 (US$)(4)             +8.29%    +17.81%   +20.90%    +21.61%    +12.46%     +6.31%       16.77%           +0.26 
JPM Global Gov't 
 Bond Index (TR) 
 (US$)(4)             +2.67%    -3.28%    -5.06%     -0.95%     +1.05%      +4.07%        6.67%           +0.31 
 

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 (2.72%) for DTL and average of 1M USD LIBOR since November 2004 (2.02%) 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 30 September 2013 was as follows:

 
      NAV        YTD Performance 
 136.04 pence        +0.70% 
 

Investment Adviser's Review: July - September 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: -1.13%

Discretionary managers accounted for 65% of the portfolio at the end of September. The third quarter was mixed for the Company's managers with some of the themes that they had successfully capitalised on in the first half reversing course during this quarter, notably the currency leg of the Japan trade (long USD/JPY). In addition, the 'US recovery theme', expressed via long exposure to the US dollar versus developed and emerging market currencies, as well as shorts in US treasuries, proved particularly costly towards the end of the quarter amid the Fed's 'non-tapering' announcement. Long exposure to equities and short exposure to gold helped to partly mitigate these losses.

Natural Resources: +1.45%

Natural Resources managers accounted for 5% of the portfolio at the end of period. Positive performance during the quarter was primarily driven by the strong run-up in gold prices in July and August, benefiting the Company's managers with long positions in bullion as well as gold-related equities. In addition, the Company's managers with long crude positions profited on the back of rising prices due to growing tension in the Middle East.

Relative Value Arbitrage: +2.12%

Relative Value Arbitrage represented 8% of the portfolio at the end of September. Performance was driven primarily by strong returns from the Company's managers that focused on fundamental long/short stock-picking. Gains were partially offset by minor losses in statistical arbitrage strategies.

Systematic: -6.34%

Systematic managers accounted for 17% of the portfolio at period end. The Company's managers continued to find the going tough in the third quarter amid a difficult market environment for the strategy. Among the Company's trend following managers, long equity positions resulted in strong profits, although these gains were outweighed by the losses in the metals sector, including those arising from short gold and copper positioning. In addition, currencies proved costly for some of the Company's managers, with losses from short Japanese yen and sterling positions. The Company's non-trend managers suffered from losses in currency markets, namely long exposure to the US dollar and short positions in the New Zealand dollar and Swiss franc, and mixed positioning in fixed income.

Investment Adviser's Portfolio Outlook

The Fed's announcement on September 18, to continue its bond-buying program, took many managers by surprise. Clearly tapering is inevitable, although precisely when is clearly now dependent on US data, but 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 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 short sides.

Fixed Income

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.

Currencies

Managers have on the whole significantly reduced their long US dollar exposure in the short-term in response to the Fed's September 18 announcement. Longer-term, however, they continue to believe that the US dollar will strengthen against the Japanese yen, as well those emerging market currencies, such as the Turkish lira, which are sporting 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.

Equities

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 political developments; 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.

Commodities

Whilst light, exposure is generally expressed through short gold positions and long energy.

Material Events since 1 July 2013

July 2013

Compliance with Model Code (1 July 2013)

Pursuant to Listing Rule 15.5.1R (Compliance with the Model Code) the Company notified the market that its close period commenced on 1 July 2013 and ended following the release of its half year financial results for the six months ended 30 June 2013 on 22 August 2013.

August 2013

Half Yearly Report (22 August 2013)

The Company, in accordance with DTR 6.3.5, released its Interim Report and Accounts for the period ended 30 June 2013. The Report is available via www.dexiontrading.com and was submitted to the National Storage Mechanism and is available for inspection at www.hemscott.com/nsm.do.

October 2013

Redemption Offer (7 October 2013)

Further to announcements made by the Company on 23 April 2013 and 28 May 2013, the Directors have determined to proceed with a redemption offer for up to 30 per cent of the shares in issue. The Board expects to post a circular to shareholders containing details of the redemption offer by the end of October 2013.

Investor Information

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

Enquiries:

Carol Kilby

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

IMSGRBDGUGBBGXS