Dexion Trading Ltd (DTL) - October Net Asset Value
RNS Number : 3189R
Dexion Trading Limited
16 November 2012
Dexion Trading Limited (the 'Company')
October Net Asset Value
The net asset value of the Company's Shares as of 31 October 2012 is as
NAV MTD Performance YTD Performance
132.51 pence -1.22% -1.02%
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 12th March 2008.
Monthly Portfolio Review
Investment Adviser Portfolio Outlook
With the outcome of the US presidential election now decided, some of the
uncertainty has been lifted, although the Investment Adviser believes that the
shadow of the fiscal cliff now hangs over the markets. Risk levels amongst the
discretionary managers were fairly low in the run up to the elections but now
that some of the ambiguity has been resolved, clearer market trends will start
to re-emerge and managers will gradually and cautiously increase risk once
more. While markets may initially trade downwards at the outset of President
Obama's re-election, they are likely to eventually rally as participants take
into account the fact that a continued low interest rate environment remains
supportive of risk assets. The economic environment in Europe continues to be
very fragile, with the periphery weighed down by austerity measures and core
European countries showing weakness.
Renewed concerns over global growth weighed on markets during the month, with
the IMF cutting global growth forecasts. Economic data in the US was generally
positive, including better-than-expected employment, manufacturing and housing
reports. However, these reports were overshadowed by disappointing US third
quarter earnings and uncertainty ahead of the US elections. The European
crisis continued to weigh on markets with little progress made in the way of
reforms. Concerns focused on the ability of Greece to secure its next
installment of rescue funds, while Spain continued to insist that the country
would not ask for a bailout. In addition, Europe's economic data proved
disappointing with worse-than-expected PMI and Ifo data. On a more positive
note, economic reports in China generally met or exceeded market expectations,
but uncertainty remained over the November leadership transition and the
longer-term direction of the Chinese economy.
Equity markets experienced mixed results. The developed markets ended lower
(as measured by the MSCI World Index), with US equities falling around 2%,
while European and Japanese stocks rallied slightly. Disappointing earnings
reports were the primary driver of underperformance in US equities, while in
Europe stocks benefited from diminished stresses in the eurozone and Japanese
equities rose ahead of the Bank of Japan's decision to expand monetary easing.
Emerging markets declined overall during the month. Managers generally
continue to favour long equity positioning in the US and Europe based on the
extremely low level of rates brought about by accommodative monetary policy.
Managers are also establishing some long exposure in the Nikkei, which stands
to benefit from further monetary easing and a weaker Japanese yen.
Developed market government bond yields rose modestly in October, although
prices lacked any clear direction. In the US, yields rose early on, following
speculation that positive economic data would lead the Federal Reserve to
curtail its latest round of monetary easing. Later in the month, developed
market yields in general increased as economic data out of China showed signs
of stabilising and as positive European developments emerged, with Germany
increasingly softening its opposition to Spanish aid requirements and Moody's
retaining Spain's investment grade rating. Peripheral yields ended the month
lower on the back of these developments. In the developed world, exposure is
focused on long positions at the short end of the European yield curve, given
ongoing economic concerns. Managers continue to find profitable trading
opportunities in European peripheral bond markets, with tactical long
exposures to bonds in these regions. In the US the bias is to be short the
long end of the curve in anticipation of inflationary pressures increasing. In
the emerging world, managers continue to be selectively long emerging market
sovereign bonds as these countries also need accommodative monetary policies.
Foreign exchange price movements were driven primarily by central bank action.
The Japanese yen was one of the more notable movers during the month, falling
2.3% against the US dollar in response to the Bank of Japan's decision to
expand its asset-purchase programme for the second time in two months. The
Canadian dollar also fell sharply against the US dollar, declining by 1.6% as
the Bank of Canada delivered conflicting messages over its next monetary
policy steps. The euro rallied marginally against the US dollar as peripheral
country debt continued to stabilise. Emerging market currencies saw inflows
into Asia, with the Korean won, Chinese yuan and Singapore dollar rallying;
while the South African rand and Indian rupee fell sharply as South Africa
continued to be affected by political instability, and India further reduced
its cash reserve ratio. Managers are generally short the Japanese yen versus
the US dollar, with some increasing their exposure to this trade as the Bank
of Japan seems increasingly likely to implement further monetary easing.
Short-term managers maintain a bearish bias towards the US dollar against
various other currencies, but in the long term the bias for the currency is to
rise, especially against the euro, based on the US economic strength. Long
positions are dominated by emerging market currencies that should benefit from
reflationary measures to boost certain assets, as well as the search for
yield. These include Asian currencies and certain Latin American currencies
such as the Mexican peso.
Commodity prices declined in October. The Dow Jones-UBS Commodity Index fell
3.9% and the S&P North American Natural Resources Sector Index fell by 2.0%.
Crude oil prices sold off for a second consecutive month as US output climbed
to the highest level in more than 15 years, US jobless claims increased more
than expected and commodity prices declined in conjunction with equity markets
as a number of companies missed quarterly earnings expectations. Likewise,
gasoline prices fell as US refineries completed seasonal repairs. Conversely,
natural gas prices were up for the second consecutive month, advancing to a
ten-month high as colder weather set in across the US. Industrial metals were
negatively impacted after the World Bank cut its forecast for East Asia's
economy and the IMF cut its forecasts for world economic growth. Weaker
economic data out of China also pushed industrial metals prices lower. Gold
prices fell as a stronger US dollar curbed demand. Grain prices declined
sharply as growing conditions in the US and South America improved. Exposure
in the sector is dominated primarily by long exposure to gold and to a lesser
Discretionary: -0.45%. Performance was relatively balanced between positive
and negative contributors. On the negative side, losses were derived primarily
from a continuation of the same themes that had proved profitable in
September, namely how the extra liquidity, from monetary easing programmes,
would be supportive of risk assets. As such, long positions in commodities, US
equities and emerging market credit were among the most costly trades. On the
positive side, bullish positioning proved lucrative in Europe, where long
positions in European peripheral bonds (e.g. Spain) and, to a lesser extent,
European equities contributed positively to returns. Short exposure to the
Japanese yen was also beneficial.
Systematic: -2.90%. Losses were widespread, with declines across most sectors.
During the month, managers generally had outsized positions as a result of the
low implied volatility levels, leading to sharper losses as many sectors
suffered reversals. Among the trend following managers, long positions in US
equities and commodities, particularly gold and oil, short positions in the
euro and long positions in US and German bonds, proved equally costly.
Non-trend following managers suffered losses in currencies, with long Japanese
yen and Canadian dollar positions proving especially detrimental to
Natural resources: -1.09%. Long positions in oil proved detrimental, despite a
notable lack of fundamental reasons for the decline in oil prices. Long
positions in gold and gold equities offset some of the previous month's gains
on the back of a better-than-expected US employment report, diminishing its
safe haven appeal.
Relative value arbitrage: +0.14%. While statistical arbitrage strategies
suffered during the month, fundamental equity market neutral strategies offset
losses due to strong gains from short positions.
Allocation Number of
managers as Performance by
Strategy as of 31 of strategy
31 October %
Discretionary¹ 54 22 -0.45 +2.84
Natural resources 8 10 -1.09 +1.32
Relative value 6 3 +0.14 +1.35
Systematic¹ 23 10 -2.90 -3.21
Cash 9 - - -
Total 100 44¹
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.
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review of the Dexion Trading Limited portfolio.
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