Dexion Absolute Ltd January 2016 Monthly Report

 
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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            YTD 
                            Performance    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 

February 29, 2016 11:13 ET (16:13 GMT)

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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(END) Dow Jones Newswires

February 29, 2016 11:13 ET (16:13 GMT)