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DABU Dexion Abs USD

3.90
0.00 (0.00%)
Last Updated: 00:00:00
Delayed by 15 minutes
Share Name Share Symbol Market Type Share ISIN Share Description
Dexion Abs USD LSE:DABU London Ordinary Share GB00B0FXL332 US $ SHS NPV
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  0.00 0.00% 3.90 0.00 00:00:00
Industry Sector Turnover Profit EPS - Basic PE Ratio Market Cap
0 0 N/A 0

DEXION ABSOLUTE LTD - January 2016 Monthly Report

29/02/2016 4:13pm

PR Newswire (US)


Dexion Absolute (LSE:DABU)
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Dexion Absolute Limited (the “Company”)

January Final Net Asset Values

Ordinary Shares

The final net asset value of the Company’s Ordinary Shares as of 29 January 2016 is as follows:-

Share Class NAV MTD
Performance
YTD
Performance
GBP Shares 185.46p -2.10% -2.10%

2011 Redeemed Shares

The net asset value of the Company’s 2011 Redemption Portfolio was $0.47 million as of 29 January 2016. This was attributed to the Redeemed Share class as follows:-

Share Class NAV per Redeemed Share
EUR Shares US$ 0.0083

All of the Redeemed Shares have been cancelled. Accordingly, the “NAV per Redeemed Share” represents the amount then owed by the Company in respect of such Redeemed Shares at the relevant date.

2012 Redeemed Shares

The net asset value of the Company’s 2012 Redemption Portfolio was $1.60 million as of 29 January 2016. Shares redeemed pursuant to the 2012 Redemption Offer have a single USD net asset value based upon exchange rates at the relevant date. This was attributed between Redeemed Share classes as follows:-

Share Class NAV per Redeemed Share
EUR Shares US$ 0.0123
USD Shares US$ 0.0135

All of the Redeemed Shares have been cancelled. Accordingly, the “NAV per Redeemed Share” represents the amount then owed by the Company in respect of such Redeemed Shares at the relevant date.

2013 Redeemed Shares

The net asset value of the Company’s 2013 Redemption Portfolio was $1.98 million as of 29 January 2016. Shares redeemed pursuant to the 2013 Redemption Offer have a single USD net asset value based upon exchange rates at the relevant date. This was attributed between Redeemed Share classes as follows:-

Share Class NAV per Redeemed Share
GBP Shares US$ 0.0150
EUR Shares US$ 0.0183
USD Shares US$ 0.0211

All of the Redeemed Shares have been cancelled. Accordingly, the “NAV per Redeemed Share” represents the amount then owed by the Company in respect of such Redeemed Shares at the relevant date.

2015 Redeemed Shares

The net asset value of the Company’s 2015 Redemption Portfolio was $54.88 million as of 29 January 2016. Shares redeemed pursuant to the 2015 Redemption Offer have a single USD net asset value based upon exchange rates at the relevant date. This was attributed between Redeemed Share classes as follows:-

Share Class NAV per Redeemed Share
GBP Shares US$ 2.8717
EUR Shares US$ 2.9367
USD Shares US$ 4.0109

All of the Redeemed Shares have been cancelled. Accordingly, the “NAV per Redeemed Share” represents the amount then owed by the Company in respect of such Redeemed Shares at the relevant date.

These valuations, which have been prepared in good faith by the Company's administrator, are for information purposes only and are based on the unaudited estimated valuations supplied to the Company's investment adviser, Aurora Investment Management L.L.C. (“Aurora”), by the administrators or managers of the Company's underlying investments and such valuations may not be considered independent or may be subject to potential conflicts of interest. Both weekly manager estimates and monthly valuations may be produced as at valuation dates which do not co-incide with valuation dates for the Company, may be based on valuations provided as of a significantly earlier date, may differ materially from the actual value of the Company's portfolio and are unaudited or may be subject to little verification or other due diligence and may not comply with generally accepted accounting practices or other generally accepted valuation principles. The Company's investment adviser, investment manager and administrator may not have sufficient information to confirm or review the completeness or accuracy of information provided by those managers or administrators of the Company's investments. In addition, those entities may not provide estimates of the value of the underlying funds in which the Company invests on a regular or timely basis or at all with the result that the values of such investments may be estimated by the Aurora. Since 1 April 2013 the Company has been transitioning to becoming a feeder fund of Aurora Offshore Fund Ltd II ("AOFL II"). AOFL II's investment manager is also the investment adviser to the Company and so valuations of the Company's investment in AOFL II may be subject to potential conflicts of interest. As at 1 February 2016 approximately 103.40% of the Continuing Portfolio (by NAV) was invested in AOFL II. The value of designated investments as at 1 February 2016 equates to approximately 1.06% of the Continuing Portfolio NAV. Certain other risk factors which may be relevant to these valuations are set out in the Company's prospectus dated 17 October 2007 and the Company's circulars dated 15 April 2011, 5 April 2012, 22 February 2013, 27 May 2013 and 26 August 2015.

Net asset values for Redeemed Shares include only those costs and expenses attributable to Redeemed Shares which have been accrued as at the relevant NAV date.

Monthly Portfolio Review

Investment adviser portfolio outlook

Financial markets were hit with a broad range of news items throughout the first month of 2016, leading to heightened volatility across a variety of asset classes. Early in the month, facing the prospect of further depleting its capital reserves, China allowed for a depreciation of the renminbi, adding volatility to markets. Simultaneously, the prospect for a boost in the oil supply from Iran weighed on oil prices, which in turn hurt equities due to their increased correlation to oil. Subsequent to that, due in part to dovish comments from the US Federal Reserve and European Central Bank, as well as an easing announcement from the Bank of Japan, US equity markets rallied into month end.

In speaking with our managers and tracking intra-month hedge fund exposure data, it is clear that the recent market slide is reflective of deteriorating sentiment across a broad array of market participants, not solely hedge fund managers. In fact, our underlying managers generally maintained relatively stable exposure levels throughout the month – they were neither cutting risk aggressively, nor were they active buyers. We found it reaffirming that our managers were able to hold their ground into the small rally at month end.

Looking forward, in a period of heightened volatility, we continue to emphasise managers employing approaches with low net exposure, as well as investments in strategies that can benefit from heightened volatility. We believe that January’s market volatility may be present throughout 2016 due to a variety of factors, including lower market liquidity and increased macro uncertainty. We believe that our current mix of hedge fund strategies and manager investments is well suited to navigate more turbulent markets, with their hedged approach intended to shield their portfolios from broad market moves, while simultaneously seeking to take advantage of indiscriminate selling to purchase assets at a discount.

In focus³

Given the tumult within financial markets in January, Aurora has been particularly active in reaching out to our hedge fund managers for meetings and calls to get a better sense of what the managers are seeing, hearing and doing amid the volatility. This month, we share with you some of the more salient observations from these manager discussions.  We also provide an update on Aurora’s current outlook from a positioning and portfolio management standpoint.

Coming out of last year’s Blank Sheet Review, Aurora made a conscious decision generally to reduce our portfolios’ exposure to hedge fund strategies having a greater reliance on equity market beta, and instead emphasise strategies that can generate more uncorrelated and idiosyncratic returns. This decision has already proven beneficial thus far in 2016. The portfolio changes resulting from that decision, in conjunction with the active management by our underlying managers, meant that between the start and end of Q4 2015 our flagship fund – Aurora Limited Partnership – saw net exposure in its fundamental strategies (excluding Macro and Portfolio Hedge) fall from 39% to less than 34% and gross exposure rise from 144% to 150%. Notably, through our January intra-month correspondence with each of our managers, it was interesting to see that there was very little additional risk reduction in January. More qualitatively, in conversations with many of our managers, the views expressed generally matched our data – managers for the most part were not cutting risk aggressively, nor were they active buyers.

In these discussions with our managers, we were struck by a handful of recurring observations. Many of the managers we spoke with expect January’s market volatility to be the new norm in 2016 as liquidity exits the system as a result of both the US Federal Reserve’s tightening and sovereign wealth funds’ selling. Credit markets remain dysfunctional and several managers cited the lack of liquidity as being the worst they have ever seen, including 2008. From a macro perspective, many managers across a variety of strategies noted that they expect the Chinese renminbi to depreciate materially in 2016 and have positioned their funds for such an event. Some Macro managers expect more hawkish policy from the US Federal Reserve (two or more hikes) than the market is currently pricing in.

Altogether, we found these conversations to be reassuring and without any sense of panic. Furthermore, we found it reaffirming that our managers were able to hold their ground leading into the small rally at month end. However, we find it notable also that Morgan Stanley is reporting that the first days of February represented the largest three-day reduction of long exposure in the last six years, likely indicating that risk reduction has resumed after January’s small rally into month end. Understanding that the situation is fluid, we will closely monitor notable shifts in positioning as we continue to experience volatility in financial markets.

Market overview

  • Markets got off to a difficult start to the year with substantial volatility amid news around the Chinese economy, oil price swings and central banking policy.
  • Developed and emerging market equities largely fell in tandem in January, while small-capitalisation US equities were among the hardest hit. From a sector perspective, the healthcare sector experienced one of its largest one-month sell-offs in over a decade, led by the biotechnology industry.  Similarly, banking stocks faced stiff headwinds, while utility and telecommunications equities were rare bright spots.
  • Not surprisingly, given the flight towards safety in January, US treasuries rallied, with yields moving from 2.27% to 1.92%, while Federal Funds Futures dramatically re-priced the odds of another interest rate hike by the US Federal Reserve in March from 51% to 14%.
  • Within corporate credit markets, high yield credit continued to experience spread-widening as the decline in oil prices increased the probability of energy company defaults. Conversely, investment grade credit benchmarks finished the month modestly higher.
  • The US dollar index continued its trend from 2015, finishing approximately 1% stronger relative to a broad basket of currencies in January. The New Zealand dollar, Chinese renminbi, Japanese yen, and euro all finished weaker relative to the US dollar.
  • Finally, commodities markets - energy commodities specifically - were down in January, with Brent crude and natural gas meaningfully weaker month over month. Conversely, precious metals such as gold and silver bucked the trend and appreciated in January.

Special opportunities¹: -9.96%

  • Our Special Opportunities investments had a difficult month with positions in the energy, industrials, technology and media sectors among the worst performers. These positions generally traded down due to negative industry and broad market sentiment, rather than company-specific news.

Long/short credit¹: -2.31%

  • Losses emanated predominantly from holdings in a Greek bank and Greek sovereign bonds, as well as long equity index exposure. 
  • Offsetting a portion of losses were holdings in a defunct investment bank, Argentina GDP warrants, credit default swaps in a natural resources company, and put options on the Saudi riyal.

Long/short equities¹: -2.53%

  • The Long/Short Equities strategy posted a negative result for the month as losses from our managers’ long books outweighed gains from their short positions.
  • For our Generalists, long exposures to technology, media, and telecommunications, consumer discretionary (particularly automotive-related companies) and financials were large sources of losses.
  • Conversely, short holdings within those sectors helped recoup some losses, most notably short positions in healthcare related companies.
  • The sell-off in technology and healthcare equities was particularly negative for our Sector Specialists, as our healthcare specialists were down for the month. Long exposure to biotechnology and healthcare services companies were the primary source of losses.
  • Conversely, our energy-focused managers offset a portion of the losses, with short positions driving positive performance.

Opportunistic¹: -2.19%

  • Losses emanated predominantly from long exposure to single-name equities, many of which declined despite the absence of company-specific developments. 
  • Holdings in a New York-based biopharmaceutical company detracted as the biotechnology industry sold off materially.  Additional losses stemmed from holdings in an enterprise software company. 
  • Long exposure to a Texas-based retailer proved costly due to the market’s perception of a weakening customer base, and holdings in a London-based telecommunications company added to losses. 
  • Conversely, one manager’s tactical trading in equity futures and currencies yielded profits.

Macro¹: -0.20%

  • The strategy finished the month modestly negative as gains emanating from exposure to commodities and currencies were offset by losses stemming from exposure to equities and US rates. 
  • A flattening of the oil futures curve, short exposure to European energy commodities, and short exposure to a variety of Asian currencies relative to the US dollar – including the Chinese renminbi and Japanese yen – yielded profits. 
  • Conversely, US interest rates positions, long exposure to Japanese equities, and long exposure to European and Indian financial companies proved costly.

Portfolio hedge¹: +5.58%

  • The Portfolio Hedge strategy delivered a positive return during January.
  • Our Short Sellers experienced particular success, benefiting from the negative performance of equity markets in addition to generating alpha relative to the equity benchmarks.
  • Short positions in the healthcare, technology and consumer discretionary sectors accounted for the bulk of the gains.
  • Our Tail-Risk Opportunities Investments also produced positive results, as long currency volatility positions – specifically in the Chinese renminbi – and a position designed to appreciate from a widening of investment grade credit spreads were large contributors.
  • Conversely, long positions in interest rate volatility and equity volatility offset a small portion of the gains.

Event driven¹: -3.35%

  • The Event Driven strategy experienced losses in January, with each of our Event Driven managers finishing down for the month.
  • Long credit and equity exposure to energy and financials companies, along with long equity investments in consumer companies, were particularly costly to the portfolio.
  • Additional losses stemmed from long exposures to the healthcare sector.
  • Conversely, select long positions in the technology, media, and telecommunications and utilities sectors, along with short positions in US automotive companies, helped offset some losses.
Strategy Allocation
as of 1 February²
(%)
Number of hedge funds as of
1 February²
Performance by
strategy¹ (%)
January YTD
Long/short credit 10 2 -2.31 -2.31
Event driven 14 4 -3.35 -3.35
Long/short equities 31 11 -2.53 -2.53
Opportunistic 16 4 -2.19 -2.19
Macro 15 5 -0.20 -0.20
Portfolio hedge 8 2 +5.58 +5.58
Special opportunities investments 6 n/a -9.96 -9.96
Total 100 28

¹Effective 31 May 2011, 31 May 2012, 28 February 2013 and 30 September 2015, DAL created separate redemption portfolios for redeeming shareholders from the EUR (for 2011, 2012, 2013 and 2015), USD (for 2012, 2013 and 2015) and GBP (for 2013 and 2015) share classes. All information presented herein is for the Continuing Portfolio only. Strategy returns are presented for AOFL II, are calculated in USD, are net only of the fees and expenses of the underlying managers and are gross of the fees of DAL’s investment manager and investment adviser and the operating expenses of DAL and AOFL II. The investment adviser implements the ‘Modified Dietz’ methodology for calculating the DAL portfolio hedge strategy returns, which takes into account the amount of time an investment is held. Under unusual market circumstances, there are certain limitations to the Modified Dietz methodology and under such circumstances the investment adviser may modify, adjust or apply a different methodology if it determines in its reasonable discretion that doing so will more accurately reflect the rate of return of the DAL Portfolio hedge strategy.

²Allocations are presented for the Continuing Portfolio and reflect the allocations of AOFL II, which are based on 29 January 2016 results and 1 February 2016 capital allocations, net of cash effect and including, for Portfolio hedge only, the delta-adjusted exposure derived from option hedges, the notional value of futures hedges, and dedicated notional gold exposure, if any. The Company classifies all managers by reference to only one of the core trading strategies provided in the chart (which include several strategies whose nature is multi-strategy). In certain instances, and over time, a manager may utilise multiple trading strategies. Consequently, it is possible that the Company’s determination of a manager’s primary trading strategy may change over time and may differ from how others may classify such manager’s primary trading strategy. Strategy allocations may vary over time. Prior to 1 January 2016, the Special opportunities investments strategy was included as part of the Event driven strategy.  Effective 1 January 2016, the Special opportunities investments allocation became a stand-alone strategy and is no longer a sub-strategy of the Event driven strategy. Accordingly, total Event driven performance includes Special opportunities investments performance for the periods prior to 1 January 2016. These changes do not reflect any changes in our underlying investment philosophy or manager selection process. Numbers may not sum to 100% due to rounding.

Manager count reflects the managers in AOFL II. For purposes of determining manager count, the manager treats investments in different hedge funds managed by the same manager using the same strategy as a composite and does not include any “Excluded Managers”. An Excluded Manager is any manager (1) for which the Company has submitted a full redemption request or (2) that manages only “Market Opportunities Investments” within the strategy. Market Opportunities Investments represent an aggregation of a select set of unique, concentrated, and opportunistic investments that may be added to the Continuing Portfolio to benefit from compelling and timely risk seeking and risk limiting investment opportunities. The Company’s investment adviser classifies all of the Company’s managers by reference to only one of the core trading strategies provided in the chart (which include several strategies whose nature is multi-strategy). In certain instances, and over time, a manager may utilise multiple trading strategies. Consequently, it is possible that the Company’s investment adviser’s determination of a manager’s primary trading strategy may change over time and may differ from how others may classify such manager’s primary trading strategy.

³The In focus section of this report is for information purposes only. Any opinion expressed in this report, including with respect to the market events and potential investment opportunities that may arise, is purely the opinion of the Company’s Investment Adviser, may be speculative, and is subject to change without notice. This report should not be considered investment advice or relied upon as such. This report should be not be considered an indication of the future investment decisions that the Company’s Investment Adviser will make for the Company. Statements that are made in this report that are not based on historical facts are forward-looking statements. Although such statements are based on the Investment Adviser’s current estimates and expectations, and currently available competitive, financial, and economic data, forward-looking statements are inherently uncertain. There can be no assurance that the estimates and expectations made in connection with any forward-looking statement will prove accurate, and actual results may differ materially. The Investment Adviser makes no representations or warranties regarding the accuracy or completeness of the information included in this report and is not liable in any way as a result of its use. Exposure information is as of the specific dates. Please see the important information included in the General Disclaimers and Endnotes section of AOFL II’s exposure report, which can be found on Aurora’s secure website at www.aurorallc.com.

Supplementary Information

Click on, or paste the following link into your web browser, to view a full review of the Dexion Absolute Limited portfolio.

http://content.prnewswire.com/documents/PRNUK-2902161610-988C_DAL_MPR_2016_January_CC.pdf

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