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Dexion Trading Limited  -  DTL   

March Net Asset Value

Released 09:49 19-Apr-2013

RNS Number : 7738C
Dexion Trading Limited
19 April 2013

Dexion Trading Limited (the "Company")


March Net Asset Value


The net asset value of the Company's Shares as of 28 March 2013 is as follows:-


GBP Shares



MTD Performance

YTD Performance

138.15 pence




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


Positive sentiment dominated markets in March, despite US budget cuts taking effect and renewed troubles in Europe, resulting in a resumption of the "risk-on" trade. In the US, positive economic data, including a drop in the unemployment rate to 7.7%, an upward revision in fourth quarter GDP and a rise in home prices, outweighed concerns over the impact of sequestration budget cuts. Europe, on the other hand, suffered from less optimistic news, as the latest concerns in the ongoing credit crisis resurfaced when the Cypriot banking system became at risk of collapse, while Italy remained at a political stalemate and social unrest continued in Spain. In Japan, new Bank of Japan governor Kuroda reiterated his strong desire to halt deflation and target 2% inflation within two years.


Market Overview


Manager outlook remains very positive with regards to the rich macro opportunity set unfolding globally. In the US, the economy continues to demonstrate resilience, especially in the housing sector, helping to support the US dollar as well as equities. This economic buoyancy has sparked debate within the Federal Reserve about the benefit of additional asset purchases. However, the recent disappointing payroll numbers have dampened market optimism somewhat. Europe remains in a fragile economic state and continued accommodative policy appears to remain an essential remedy for the region. The occasional revival of socio-economic uncertainty - as recently evidenced in Cyprus and Italy - only aggravates the existing malaise and concerns. UK economic growth remains lacklustre and there are concerns that the UK could fall into another recession. Managers expect that the Bank of England will implement increasingly dovish policies in order to address weak growth, resulting in continued bearish implications for sterling. In Japan, managers believe that the fight against deflation is a priority, necessitating additional monetary easing in addition to fiscal expansion.


China is struggling with its own set of macro complications, including concerns over the lack of clarity on monetary policy and high property prices. Other emerging markets present a mixed outlook, with certain countries such as Brazil dealing with constraints, namely high inflation, and others such as India aiming to tackle their current account deficit. The strongest performer within emerging markets is Mexico, which is benefiting from favourable political reforms and its links to a relatively strong US economy.


Global equity markets rallied in March, with the MSCI World (local currency) returning 2.7%, led once again by Japan, while Chinese equities continued to decline. In the US, encouraging economic data boosted stock prices, bolstered by the FOMC's announcement in the latter half of the month which reaffirmed the Federal Reserve's commitment to maintaining accommodative policy. European equities likewise rallied in the early part of the month, but quickly reversed in the second half when the financial stability of Cyprus was called into question and concerns circulated that capital controls in the country could set a precedent for the rest of the eurozone. Chinese equities also suffered amid a decrease in risk-taking in response to the Cyprus news, as well as China's renewed tightening measures in property markets. Managers maintain long positions in US and Japanese equities, with a higher exposure to the latter as some believe that the rally in US stocks may be somewhat stretched from a valuation standpoint.


Global government bond prices climbed in March. At the start of the month, prices declined as better-than-expected economic data, particularly in the US, spurred optimism over the prospects for global growth. However, as the situation in Cyprus threatened to trigger a run on banks across the region, safe haven buying of government bonds in the major developed markets resumed. Despite fears of contagion, bond yields on peripheral European debt remained relatively stable. In terms of manager positioning, in the US, the bias continues to be short rates in the 10 year sector. In Europe, managers are generally maintaining long positioning in European rates and German bonds due to the eurozone's fragile growth outlook, prolonged deleveraging, fiscal austerity and substantial central bank liquidity. Emerging market-focused managers have short exposure in markets where they believe the bond rally has overshot.


The euro continued to weaken against the US dollar in March as eurozone finance ministers warned that private investors may have to bear greater risks in future bank bailouts in the region. In a reversal of the recent trend, sterling strengthened against the US dollar during the month, on the back of comments from the Bank of England's MPC that the pound had been sufficiently devalued, as well as some upbeat economic data, including an increase in retail sales. The yen weakened further against the US dollar, despite safe haven flows to the yen towards the month-end. Commodity currencies, including the Australian and Canadian dollars, were driven higher on the back of better-than-expected economic data. Within the emerging market space, the most notable currency movement during the month was that of the South Korean won, which fell more than 2.5% versus the US dollar amid the increased risk of conflict with North Korea and worsening economic data. Amongst most managers, especially the developed market-focused managers, long positioning continues to be dominated by being long the US dollar on the back of relatively positive economic data in the US.  Managers maintain shorts in the Japanese yen, although for some in reduced size given the currency's significant depreciation over the past few 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 and economic uncertainty. Emerging market-focused managers continue to be long currencies with strong supporting fundamentals, such as the Mexican peso.


Commodity performances were mixed during the month. In the energy space, WTI crude oil rose as stronger US economic data pushed prices higher, including a revision upwards to the Q4 GDP figure, rising equity markets and Cyprus's agreement with creditors on a bailout package. Natural gas also performed well, with prices climbing to an 18-month high as cold weather in key consuming regions across the US persisted. In metals, gold prices moved higher for the first time in five months on the back of the turmoil in Cyprus and subsequent impact on economic recovery across the eurozone. Base metals prices were broadly lower in March, falling as a result of weaker Chinese demand and rising inventories. In the equities space, energy-related equities, including exploration and production, oil services and integrated oil stocks, rose in March. Gold-related equities, particularly small-cap gold miners, also increased as the sector moved higher after an acute sell-off over the last five months. Managers' commodities exposure remains very light with some long exposures to gold as a hedge against inflation. In addition, some managers believe that investors may increase their holdings in gold as their confidence erodes in certain banks, particularly after the Cyprus episode.

Strategy Overview


Discretionary: +0.82%. The developed market-focused managers generated profits in March from their long positioning in equities, particularly in Japan (the Nikkei and Topix).  On the currency side, longstanding short positions in the Japanese yen continued to be a profitable trade, as were shorts in the euro. Long positions in the Mexican peso also proved accretive. The fixed income sector detracted somewhat, with losses stemming from shorts in UK gilts and US treasuries. Emerging market-focused managers experienced muted and, in some cases, negative returns on the month, losing from long exposure to emerging market currencies and equities.


Systematic: +1.08%. The overwhelming majority of gains were driven by long positions in the equity sector, particularly in the US and Japan, among the portfolio's trend following managers. Fixed income positions were also profitable, as the longer-term trend of rising bond prices resumed, benefiting those with long exposure to government bonds. The allocation to non-trend following managers detracted from some of the gains during the month, with losses continuing to result from long positions in the Japanese yen. Additionally, short Australian and Canadian dollar positions generated losses.


Natural resources: -1.73%. Losses during the month were mostly centred on company specific names in the agricultural and energy sectors.


Relative value arbitrage: +0.34%. Managers produced gains from liquidity arbitrage and statistical arbitrage strategies, while fundamental long/short stock-picking was less successful.




as of

28 March


Number of managers as of

28 March

Performance by strategy











Natural resources





Relative value arbitrage





















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.

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March Net Asset Value - RNS