DABE Dexion Abs Eur

Dexion Absolute Limited (the “Company”)

August Final Net Asset Values

Ordinary Shares

The final net asset values of the Company’s Ordinary Shares as of 28 August 2015 are as follows:-

2011 Redeemed Shares

The net asset value of the Company’s 2011 Redemption Portfolio was $1.45 million as of 28 August 2015. This was attributed to the Redeemed Share class as follows:-

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 $3.29 million as of 28 August 2015. 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:-

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 $3.91 million as of 28 August 2015. 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:-

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 September 2015 approximately 94.43% of the Continuing Portfolio (by NAV) was invested in AOFL II. The value of designated investments as at 1 September 2015 equates to approximately 1.59% 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 and 22 February 2013.

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

In taking a step back to survey the broader economic ecosystem, it is our belief that US growth will not be materially impacted, at least in the short to medium term, by the ongoing economic events in China and remain confident that the broader global financial system is well insulated from China to limit the probability of wide scale contagion. However, we are also cognisant that risk assets, including corporate equity and credit instruments, remain priced optimistically following a five-plus year bull run.

Global investors applying a more discerning eye to the price paid for risk assets is ultimately a healthy change as well as the potential opportunities that arise out of increased volatility across financial markets. We anticipate that both factors should serve the underlying hedge fund managers well. In the meantime, we remain in ongoing dialogue with our managers and are actively looking for long and short opportunities that may present themselves in the face of the market’s recent turmoil.

In focus³

In August, uncertainty crept back as global equity markets experienced the most precipitous one-month decline in over three years, with volatility rising across asset classes.  Given this backdrop, the Company’s investment adviser offers a few observations regarding today’s market ecosystem, specifically on the topics of market liquidity and technical selling.

Many have commented in recent weeks about the impact of volatility-induced systematic selling.  Some observers have pointed to risk-parity strategies as a culprit and others have suggested that VaR (value at risk)-based risk mitigation methodologies may be another. Risk-parity programs generally employ high-leverage trading strategies that rely on algorithms to adjust portfolio exposures systematically based on target volatility. VaR-based risk parameters, on the other hand, are part of a risk-mitigation technique used by many investment managers globally. It seems that some part of the volatility experienced in August may have been driven by these factors, as rising volatility levels within portfolios gave way to the desire to rapidly reduce risk in order to comply with VaR limits.

One by-product of quantitative easing – artificially low volatility – has driven the popularity of such strategies in recent years.  In other words, after a prolonged period of low financial market volatility, investment strategies relying on these approaches have become much more appealing to investors.  But because these approaches are designed to cut risk in times of stress with little regard for qualitative assessment, they have the ability to become self-fulfilling (forced selling leads to higher volatility, which leads to more forced selling).

The problem was compounded in August when the technical selling was met with unusually low liquidity across both equity and credit markets – partially attributable to the time of year (August is historically a lower volume month) and to structural reasons (for example, low dealer inventories for credit securities).

In this environment, a skilled hedge fund manager may be positioned to profit by providing liquidity to other market participants who are forced to sell securities. At the same time, however, the investment adviser feels that market conditions like those they have seen in recent years increase the probability of volatile market periods like the one experienced in August. For these reasons, they are particularly enthusiastic about allocations to the Macro and Tail-Risk Opportunities strategies, both of which can profit from increased market volatility across asset classes. Furthermore, they believe that markets in which indiscriminate selling creates significant price dislocations provide interesting opportunities to managers across all of their strategies who employ a value-based investment approach.

Market overview

• Global financial markets faced one of the greatest upsurges in market turmoil seen in recent memory, with both US and non-US equities generally experiencing their worst monthly decline in over three years, while the CBOE Volatility Index (the so-called "fear index") posted its highest monthly change in its history (surpassing the record previously set in October 2008).
• Concerns over China's future growth prospects provided the initial market shock and raised broader questions about the health of the overall global economy. This uncertainty, combined with the market's optimistic corporate valuations and the absence of liquidity across various financial exchanges, resulted in dramatic market moves and big headlines.
• Credit markets also felt the effects of these concerns, particularly in riskier credit assets such as US high-yield bonds, which underperformed versus the credit markets in August.
• Foreign exchange markets were the epicentre for much of the action during the month, spurred by China's surprise devaluation of the Yuan, which in turn sparked broader declines across emerging market currencies. At the same time, the US dollar weakened against both the euro and the Japanese yen.
• While the month-over-month move in 10-year US treasuries appears rather muted, it does not accurately reflect the intra-month swing experienced as investors sought refuge from a sell-off in risk assets early in August. However, when asset prices reversed course towards month end, US treasury yields retraced their gains and finished the month marginally higher than where they started. Both the UK gilts and the German bunds experienced a similar trading pattern during the month.
• Finally, broader commodity benchmarks finished the month slightly higher, but like fixed-income markets, commodities experienced a big intra-month swing. At one point, certain commodity benchmarks hit a 16-year low on the back of concerns that a slowdown in Chinese demand would exacerbate certain supply gluts.

Long/short credit¹: -1.59%

• The strategy endured a challenging environment as global growth concerns led to a broad-based sell-off in credit markets.  Losses emanated predominantly from domestic credit exposure as well as global equity exposure.
• More specifically, credit exposure to a Texas-based oil E&P company resulted in notable losses for one manager.
• Within equities, long exposure to European and Japanese index futures detracted, as did single-name holdings in a Detroit-based auto manufacturer and a Spanish industrial company.
• Additional losses stemmed from oil and gas-related equity investments, as the slowdown in China created enormous volatility in energy commodity markets.
• Helping to negate a portion of losses were holdings in Greek and Argentine government bonds as well as short exposure to the Chinese yuan.

Long/short equities¹: -1.75%

• Losses primarily stemmed from the geographic specialists and generalists while the sector specialists helped offset a portion of the losses.
• Geographic specialists saw the biggest decline, as long holdings in consumer goods, industrials and financials were the largest detractors.  Notable individual losers included positions in a global agricultural chemicals business, a global information services company and an Indian mortgage bank.
• Among generalists, losses were derived from long positions in the energy, technology, media and consumer-related sectors.
• Conversely, the bulk of the strategy’s profits emanated from sector specialists.
• Notably, long positions in the energy sector, along with short positions in the industrials and basic materials sectors, were the most additive.

Opportunistic¹: -4.57%

• August presented a difficult month for the strategy as concerns regarding global growth resulted in a broad-based sell-off of risk assets.
• Long credit exposure was the primary source of losses, including exposure to a financial services company that yielded a loss after the company reported disappointing second quarter results plus a number of material strategic initiatives.
• One manager’s holdings in a biopharmaceutical company detracted as earnings missed estimates and the stock was downgraded by a large, reputable sell-side firm.
• Furthermore, short positions in the Japanese yen detracted as volatility emanating from China created a flight to quality, whereby global investors used the yen as a safe-haven asset.
• Equity market hedges helped negate a portion of losses.

Macro¹: -1.00%

• Gains emanating primarily from short currency exposure were not enough to offset losses stemming largely from long equity holdings, interest rate exposure, and oil-related positioning.
• More specifically, long equity exposure to China, India, Japan, and the US detracted, as did long exposure to Brazilian rates and short exposure to US rates.
• Oil-related positioning, namely, short orientation towards time spreads in both crude and distillates, added to losses.
• Helping to negate a portion of losses was short exposure to several currencies including the Indonesian rupiah, the Taiwanese dollar, the New Zealand dollar, the South African rand, the Turkish lira, the Singapore Dollar, and the Korean won.

Portfolio hedge¹: +4.91%

• The Portfolio Hedge strategy experienced a particularly strong month, as both tail-risk opportunities and short sellers produced strong results.
• Strong performance from tail-risk opportunities was led by a straddle trade involving the Chinese renminbi designed to benefit from increased volatility in the currency as well as a move higher or lower against the US dollar.
• Additional profits stemmed from options on the Brazilian real and long volatility positions in the S&P 500 and EuroStoxx.
• For the two short-sellers, exposure to the healthcare, technology and consumer sectors contributed to the positive returns.

Event driven¹: -3.39%

• The Event-Driven strategy also experienced losses, as both Event-Driven managers and special opportunities investments were negatively impacted by the market volatility and broad declines.
• Our Event-Driven managers were most negatively impacted by holdings in healthcare and media companies.
• Among our special opportunities investments, holdings in a renewable energy Yieldco with emerging market ties, a chemical manufacturing company, and an energy infrastructure and natural gas company were the largest detractors.
• Conversely, special opportunities investments in two banks, one based in the US and the other in Europe, helped to offset losses.

¹Effective 31 May 2011, 31 May 2012 and 28 February 2013, the Company created separate redemption portfolios for redeeming shareholders from the EUR (for 2011, 2012 and 2013), USD (for 2012 and 2013) and GBP (for 2013 only) share classes. All information presented herein is for the Continuing Portfolio only. Strategy returns are in USD, are net only of the fees and expenses of the underlying managers and gross of the fees of Company’s investment manager and investment adviser and the operating expenses of the Company and AOFL II. In addition to the Company’s direct holdings, strategy returns include the underlying manager holdings in AOFL II. The investment adviser implements the ‘Modified Dietz’ methodology for calculating the Company’s 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 Company’s portfolio hedge strategy.

²Allocations for the Continuing Portfolio are based on 28 August 2015 results and 1 September 2015 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. Numbers may not sum to 100% due to rounding.

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.

Supplementary Information

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http://content.prnewswire.com/documents/PRNUK-2909151320-232F_DAL_MPR_2015_August_CC.pdf