Dexion Absolute Ltd January 2016 Monthly Report
29 Février 2016 - 5:13PM
UK Regulatory
TIDMDAB TIDMDABE TIDMDABU
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
END
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