Market Making

Specialist Market Makers

Dexion Capital plc provides full market making and dealing services. By specialising in the listed hedge fund sector the market making team provides specialised market expertise and will also disseminate investment research on the investment trust sector.

The market making operation trades as principal on behalf of Dexion Capital plc and effects trades between clients on an agency basis (including acting as sales agent). Dexion’s extensive sales and distribution network encompassing banks, institutional asset managers and private client investment advisory firms, within the UK and across Europe, gives access to natural liquidity in a typically illiquid sector.

Contact the Dealing Desk on:

+44 (0)20 7832 0999 or STX 79411 & 79412

Additional Information

Market Making, Principal, Agency, SETS, UK Domestic & IOB

Firm Code: 229
CREST Code: 9QMAY
Member Mnemonic1: DEXC
Member ID2: DEXCGB21
DTC Code: 68357
Euroclear Bank Code: 16709

Investment Adviser

The Guernsey Branch of Man Investments (CH) AG acts as Dexion Commodities Limited’s (the Company) Investment Adviser and is responsible for the ongoing day to day management of the Company’s investment portfolio.

Man Investments (CH) AG is a leading provider of alternative investment solutions in Europe, specialising in hedge funds and convertible bonds. It is headquartered in Pfäffikon/SZ, Switzerland, and also has offices in London, New York, Chicago and Singapore.

Man Investments (CH) AG is an owned subsidiary of Man Group plc, a FTSE 100 company. It retains investment management independence from Man Group plc and is able to focus exclusively on manager selection, asset allocation, portfolio, and risk management. The vast majority of its 180 employees are involved in investment management and/or hedge fund research with Man Group plc providing a full range of administration support functions.

Philosophy

The Investment Adviser believes that a multi-manager, multi-strategy commodities themed fund of hedge funds offers Shareholders exposure to an attractive return stream which is not widely exploited by investors. Opportunities in the commodity sector are diverse, complex, difficult to exploit and therefore not fully explored thus creating opportunities for active commodity managers. In particular commodity focused funds of hedge funds are well suited to diversify the idiosyncratic risks associated with individual commodity managers. The Investment Adviser believes that it has the experience and depth of resources to fully understand such idiosyncratic risks and has the ability to construct an actively managed fund of hedge funds portfolio.

The Investment Adviser believes that commodity markets are currently less well understood compared to major stock and bond markets, and that this offers excellent investment opportunities for skilled hedge fund managers as well as diversification versus other investments.

Given the finite nature of fossil fuels and increasing environmental concerns, the Investment Adviser believes commodity and environmental industries will continue to gain focus and investment over the medium term and that commodities themed hedge funds should be well placed to generate positive returns.

The revised investment policy of the Company will also provide Shareholders with the potential to access long volatility strategies which may provide an attractive source of alpha or protection for the portfolio.

Commodities investment can be accessed in three principal ways:

Commodity indices
Commodity related equities
Commodity focused hedge funds

The Investment Adviser believes that active management of commodities investment via dedicated hedge funds has, historically, produced better risk adjusted returns than investment in commodities via more traditional methods.

Manager Selection

The manager selection initiative forms the bottom-up part of the investment process. Following the identification of suitable potential investments, the Investment Adviser conducts extensive due diligence on each investment opportunity and the manager involved. The goal of its due diligence process is to identify quality investment capacity in commodity-related strategies. All potential investments are incrementally scrutinised and checked against various success criteria. With each step of the due diligence process, the insight into each investment increases while the number of potential investments is reduced.

The due diligence process includes onsite manager visits by the Investment Adviser’s research analysts, reference checks and thorough risk management and legal checks. Due diligence commences with detailed quantitative analysis of each manager’s past performance using a variety of tools and programmes developed by the Investment Adviser. This includes comparative peer group analysis and an examination of performance under conditions of market stress. The Investment Adviser gauges the versatility of managers by simulating their performance impact on various portfolios.

Qualitative considerations include performance sustainability, which involves an assessment of the alpha of each manager’s strategy and whether the manager has the requisite skills to successfully implement the strategy, strong risk management capabilities, alignment of interest and manager experience. A manager has to pass through all the due diligence stages and meet the qualitative and quantitative selection criteria in order to join the approved investment list. Selection also requires independent approval by the operational risk and qualitative risk management teams, and the Investment Adviser’s investment committee must approve each investment dimension, meaning:

the manager is deemed to possess all the necessary attributes to successfully manage the investment strategy;
the investment strategy is fundamentally sound and is capable of delivering the required risk/return characteristics; and
the investment product fulfils all economic, legal and structural requirements.

Once an investment is approved, its continued quality is assessed through the change management (ongoing due diligence and risk management) process.

Portfolio Construction

Investment strategies

The investment strategies module forms the top-down part of the investment process and provides a macro framework within which the Investment Adviser’s senior investment professionals determine and manage the top-down aspects of the asset allocation process. It enables assessments of current and anticipated industry-wide trends and developments to be co-ordinated and applied in a clear and structured manner.

The investment strategy is conceptualised in terms of strategic and tactical allocation processes. The strategic asset allocation (SAA) process is quantitatively driven, is performed annually and acts as a long-term guideline. Proprietary programmes are used to optimise the risk/return of a proposed portfolio by computing the optimum allocation weightings to the various alternative investment fund styles that the Company is or may be invested in.

Portfolio management

The portfolio management module focuses on the client or product-specific aspects of the overall investment process for each asset class. The portfolio management specialists utilise the building blocks of managers and strategies, making use of the best available investment opportunities or managers identified as part of the bottom-up investment selection process.

Portfolio management is based on predefined investment parameters and objectives such as risk-return, correlation and diversification.

Correlations between the constituent strategies provide an important guideline for portfolio construction and management decisions. Pairs of negative or non-correlating investments can reduce the risk of a portfolio even if each of those investments has a high level of volatility. The Investment Adviser has developed optimisation tools capable of modelling the precise mix of investment correlations to manage overall portfolio risk. However, because correlations tend to change over time, the quantitative results of correlation optimisation help to guide rather than determine portfolio compositions.

Risk Management

The Investment Adviser places great emphasis on managing risk in a proactive way throughout the entire investment process. In this sense, risk management is not simply a distinct discipline, but rather an attitude applied to the entire investment process. Fundamental in this regard are the depth of due diligence during the investment selection process and the Investment Adviser’s capabilities in identifying risk-controlled investment strategies. In arriving at the optimal strategy mix, exposures to market, credit and liquidity risk are proactively addressed and, as far as possible, mitigated.

The Investment Adviser also ensures risk is managed independently of the other investment modules at both the investment and portfolio level. At the investment level, operational risks are monitored as part of the change management (ongoing due diligence) process. Strategy risks are also monitored to obtain early warnings of style drift or performance deterioration. This involves the systematic monitoring of risk and return characteristics, including the consistency and distribution of returns, drawdowns and abnormal deviations or return ‘breakouts’. Peer group analysis is also an important tool for risk monitoring.

At the portfolio level, ongoing risk monitoring and management ensure the Investment Adviser adheres to the predetermined investment guidelines for the Company. The risk management activities include asset allocation reviews, VaR (Value at Risk) calculations, stress testing to assess sensitivity to adverse scenarios, and risk attribution analysis. Exposure reports enable the Investment Adviser to quickly identify unfavourable positions that disrupt the target risk profile.

Dexion Capital (Guernsey) Limited

Dexion Capital (Guernsey) Limited is a Guernsey based management company. The firm is privately owned and independent of any fund management group and is regulated by the Guernsey Financial Services Commission.

Dexion Capital (Guernsey) is responsible for the management of the Dexion Commodities Limited portfolio and has delegated certain of its duties, including making investment decisions, to the Investment Adviser, Man Investments (CH) AG.

Dexion Capital (Guernsey) has contracted with the Investment Consultant, Dexion Capital plc for the provision of certain advice and services including the monitoring of the Investment Adviser’s performance and ongoing investor relations.

Dexion Capital (Guernsey) is the manager of London listed funds of hedge funds:

Dexion Absolute Limited – launched December 2002
Dexion Equity Alternative Limited – launched in April 2004
Dexion Trading Limited – launched in November 2004
Dexion Commodities Limited – launched in March 2006

Investment Adviser

Permal Investment Management Services Limited acts as Dexion Trading Limited’s (the Company) Investment Adviser and is responsible for the ongoing day to day management of the Company’s investment portfolio. Permal has been independently selected by Dexion Capital (Guernsey) Limited as the Investment Adviser for the Company. Permal is a member of the Permal Group, an international group of companies held by Permal Group Limited, a subsidiary of Legg Mason Inc., with principal offices in New York, London and Singapore. The group has 200 employees, including 37 investment professionals. Assets under management for Permal are approximately US$38 billion (all figures as at the end of August 2008 and liable to change thereafter).

The Company’s assets are managed according to a mandate consistent with that of the Permal Macro fund.

Philosophy / Process

Permal’s investment process can be summarized in three main steps:

Manager search and due diligence – quantitative and quantitative assessments;
Portfolio construction and asset allocation – seek to assemble optimal mix of managers and strategies using top-down and bottom-up analysis; and
Risk management and performance monitoring – portfolio manager and business risk monitoring.

The Permal Investment Committee establishes the top-down macro-economic view. Investments are then made, reviewed and / or modified to reflect the strategies that will benefit from this view and the managers that participate appropriately in that strategy.

The members of the Investment Committee are ultimately responsible for manager selection using research performed by analysts and portfolio managers. Investment decisions are reviewed in the monthly joint meeting of the Investment Committee and Risk Committee.

Manager Allocation

The manager allocation process is primarily bottom-up, however, the top-down view Permal develop forms the background which they assess potential managers. Permal uses it due diligence process, which has been refined by many years of experience, to select some of the most well known independent investment managers in various categories.

Once Permal believes that a particular strategy / style will fit a particular portfolio and that it is consistent with their outlook, Permal allocates to managers that participate in that strategy. The process is generally evolutionary and is executed over time. The average timeline for the manager selection due diligence process is 6 months and the number of visits to an underlying manager’s office will vary on a case-by-case basis, but every manager is generally visited at least once prior to investment. After initial investment, Permal will have at least one annual face-to-face meeting supplemented with quarterly contacts (at a minimum).

Portfolio Construction

The Investment Committee establishes the top-down macro-economic view and based on this outlook, the asset allocation is reviewed and modified to reflect:

the strategies that will benefit from this view
the managers that participate appropriately in that strategy

Based on the macro-economic view, target allocations for each of the major regions and strategies are set. While there are no explicit minimum or maximum weightings to a strategy, prior moth weightings, prior month weightings are typically maintained within a band of + / – 10%.

Risk Management

The risk management function at Permal is organized at two levels:

individual manager risk (idiosyncratic risk)
overall portfolio risk monitoring (systematic risk)

Permal believes that the starting point for reducing risk is through diversification among managers, strategies, asset classes, regions and styles. At the manager level, Permal’s in-depth assessment of the strategy aids the analysis of embedded risks in manager portfolios (market, credit, liquidity, leverage) and their overall weighting in the portfolio.

Key components of the manager due diligence generally includes:

visits to managers offices at least once per year, including meeting with and reviewing back office personnel and operations;
contact with the managers administrator, and at times, their prime broker and auditors;
vigilant review of employee turnover, late or abnormal performance reporting, discrepancies in performance between manager and prime broker;
semi-monthly performance reviews; and
monthly analysis of overall gross and net market exposures, broken down by industry and country.

Permal also seeks to reduce the overall portfolio risk by:

diversification
building positions slowly, letting relationships expand gradually over time
on-going monitoring of each manager
monitoring the portfolio

Dexion Capital (Guernsey) Limited

Dexion Capital (Guernsey) is responsible for the management of the Dexion Trading Limited portfolio and has delegated certain of its duties, including making investment decisions, to the Investment Adviser, Permal Investment Management Services Limited.

Dexion Capital (Guernsey) is the manager of London listed funds of hedge funds:

Dexion Absolute Limited – launched December 2002
Dexion Equity Alternative Limited – launched in April 2004
Dexion Trading Limited – launched in November 2004
Dexion Commodities Limited – launched in March 2006

Investment Adviser

K2 Advisors LLC acts as the Company’s Investment Adviser and is responsible for the ongoing day to day management of the Company’s investment portfolio.

K2 Advisors was founded in 1994 and as at the end of July 2008 had 78 employees and approximately US$7.4 billion in assets under management in fund of hedge funds. K2 Advisors is a dedicated fund of hedge funds manager and is privately owned, the substantial majority of the equity being held by the founders, David Saunders and William Douglass. K2 Advisors is headquartered in Stamford, Connecticut with offices in New York, London, Tokyo and Sydney. K2 Advisors is registered with the US Securities and Exchange Commission as an investment adviser.

K2 Advisors’ first fund of hedge funds, K2 Investment Partners LP, was launched in October 1994 and has delivered, since inception to 31 July 2008, an average annualised US$ return of approximately 12.8%. The Company’s assets are managed according to a mandate consistent with that of K2 Investment Partners LP.

Philosophy

The Investment Adviser seeks to generate superior investment returns while preserving capital by selecting a diversified group of hedge funds managed by portfolio managers who have demonstrated superior investment performance or who the Investment Adviser reasonably believes have the ability to achieve such performance.
This investment philosophy and approach has been consistently applied by the Investment Adviser since October 1994. Critical success factors which drive the investment process are:

a senior management team with practical hedge fund experience;
early identification of, and investment with, new portfolio managers to secure future capacity and holdings-based reporting;
the ability to identify increased risk to existing portfolio managers and/or hedge fund strategies; and
ensuring adequate diversification across investment strategies, industry sectors and markets.

Manager Selection

The Investment Adviser is responsible for the allocation of the Dexion Equity Alternative Limited’s (the Company) assets in accordance with the Company’s investment objective and investment policy. In selecting hedge funds, the Investment Adviser applies stringent and continuous qualitative and quantitative due diligence procedures to evaluate portfolio managers and analyse their investment strategies.

Specifically, the Investment Adviser seeks portfolio managers who satisfy the following key criteria.

Portfolio managers that have demonstrated an ability to achieve superior investment performance over a period of time. The Investment Adviser will attempt to assess a portfolio manager’s investment philosophies, skills and strategies to determine whether such strategies are likely to be successful in the future.
Generally, portfolio managers that have a portion of their personal assets and net worth invested in their own hedge funds.
Portfolio managers that have sufficient liquidity in their investment strategy. The Investment Adviser pays close attention to the total assets under management of each of the hedge funds in which the Company is invested. Once a hedge fund becomes too large, liquidity can be a detrimental to its ability to invest in certain attractive opportunities as a result of fewer investment choices and the hedge fund, by its own size, moving the markets of the securities in which it is trading, thereby causing further deterioration in its investment returns.
The portfolio manager’s success is the result of a diversified portfolio and the fund is not heavily dependant on any one particular portfolio position.
Portfolio managers that have proper professionals and advisers to assist in the management of their fund. The Investment Adviser conducts regular on-site visits to evaluate a portfolio manager’s support infrastructure and assesses the portfolio manager’s custodian, accountant, lawyers and prime brokers. The Investment Adviser conducts regular on-site visits to evaluate a portfolio manager’s support infrastructure and assesses the portfolio manager’s custodian, accountant, lawyers and prime brokers.

Portfolio Construction

The Investment Adviser combines a top-down process to determine strategy weightings with a bottom-up manager selection component. Portfolio construction is also influenced by the Investment Adviser’s risk assessment of both the investment strategy and the portfolio manager.

Generally 60 – 70% of the Company’s assets will be invested in equity long/short strategies intended to generate a higher return but with a higher volatility with 30 – 40% invested in low volatility strategies such as relative value arbitrage, distressed securities and merger arbitrage intended to generate lower but less volatile and more consistent returns. The Investment Adviser will generally seek to procure that (i) not more than 10% of the Company’s total assets are invested in any one fund, (ii) the Company will not have a net exposure (in particular netting off long and short positions) to any single industry sector exceeding 25% of its total assets and (iii) with the exception of equity long/short, not more than 20% of the Company’s total assets are invested in any single hedge fund strategy, although it may deviate from such guidelines from time to time.

The exact number of funds and strategies used may vary over time but the Directors expect that, consistent with the investment strategy of K2 Investment Partners, the Company will be invested at all times in a minimum of 20 underlying funds implementing at least 3 different strategies.

Risk Management

K2 Advisors implement an advanced approach to risk management. Over 87% of underlying portfolio managers (including prospective managers) provide monthly security position or sector level transparency, directly or indirectly, to independent third party risk analytics providers who in turn provide the Investment Adviser with a range of analyses including an independent mark-to-market of securities and detailed exposure reports at the portfolio manager and aggregate portfolio level. Independent pricing of individual security positions and the ability to identify portfolio concentrations and correlations at both the portfolio manager and aggregate portfolio level enables the Investment Adviser to assess two key sources of risk in hedge fund investing.

Dexion Capital (Guernsey) Limited

Dexion Capital (Guernsey) is responsible for the management of the Dexion Equity Alternative Limited portfolio and has delegated certain of its duties, including making investment decisions, to the Investment Adviser, K2 Advisors LLC.

Dexion Capital (Guernsey) is the manager of London listed funds of hedge funds:

Dexion Absolute Limited – launched December 2002
Dexion Equity Alternative Limited – launched in April 2004
Dexion Trading Limited – launched in November 2004
Dexion Commodities Limited – launched in March 2006

Investment Adviser & Investment Process

Investment Adviser

Aurora Investment Management L.L.C. (Formerly Harris Alternatives LLC) acts as Dexion Absolute Limited’s (the Company) Investment Adviser and is responsible for the ongoing day to day management of the Company’s investment portfolio.

Aurora Investment Management was established in 1988 with 66 dedicated employees and US$14 billion under management in fund of hedge funds and segregated accounts as at end June 2008. Aurora Investment Management is based in Chicago, Illinois, USA and is registered with the SEC as an Investment Adviser. On 31 December 2003 Aurora Investment Management became a wholly owned subsidiary of Natixis Global Asset Management L.P., which is itself a wholly owned subsidiary of Natixis Global Asset Management, a French institutional money management company. Aurora Investment Management remains autonomous retaining full control of all its investment decisions.

Aurora Investment Management’s principal fund of hedge funds is Aurora Limited Partnership which was launched on 1 January 1988. Aurora’s investment objective is to generate consistent long-term capital appreciation with low volatility and little correlation with the general equity and bond markets through a portfolio having a diversified risk profile. The Company’s assets are managed according to a mandate consistent with that of Aurora Limited Partnership.

Philosophy

The Investment Adviser selects hedge funds managed by independent portfolio managers and actively allocates capital amongst these funds in pursuit of consistent rates of return, with low correlation to equity or bond markets.

Critical success factors that guide the investment process are:

identifying managers who are the best and brightest within their universe with a proven track record, a sustainable edge and a significant proportion of their own capital invested in the same hedge fund or strategy
performing extensive, ongoing due diligence on each manager
ensuring adequate portfolio diversification across asset classes, markets and investment philosophies

In selecting investment strategies, the Investment Adviser considers the return expected from a given strategy, the risk or probability of a significant decrease in value of the investment, the marketability of the securities involved, the extent to which the performance of the strategy correlates with other strategies, the type of investment or economic environment that will affect the particular strategy and the cost of implementing the strategy, including transaction costs and fees.

Manager Selection

The Investment Adviser is responsible for the allocation of Dexion Absolute Limited’s (the Company) assets in accordance with the Company’s investment objectives and investment policy. After identifying a particular investment strategy, the Investment Adviser:

identifies the principal managers using the selected strategy
makes a preliminary evaluation of those managers by comparing their performance, size and structure
interviews those who appear to offer the most attractive investment opportunities
assesses the personal characteristics of each manager, including their integrity, talent, expertise, flexibility and dedication; and
evaluates each manager in terms of risk/reward analysis and estimated cost of management

The Investment Adviser attempts to select funds and managers that have specialised expertise, are talented, flexible and opportunistic and whose funds have achieved a high rate of return relative to the apparent risk. In addition, the Investment Adviser seeks to ensure that there is sufficient organisational depth to ensure continuity or, alternatively, to provide liquidity if the manager is unable to execute its strategy effectively.

The Investment Adviser maintains an extensive database containing details on more than 2500 hedge funds and interviews over 300 managers each year. The investment pool currently consists of 73 approved managers.

Although quantitative analysis is important in evaluating a portfolio manager, the decision-making process is subjective to a significant degree as qualitative analysis is an important component of this process.

Portfolio Construction

Portfolio allocation decisions are both top-down and bottom-up. The top-down allocation process reflects the Investment Adviser’s medium term view of the opportunities in each major hedge fund sector. From a bottom-up perspective, the Investment Adviser is seeking to invest with the most talented managers available – to the extent that they identify such managers they endeavour to include them in the portfolio.

The Company’s aim is to be fully invested in a diversified portfolio of hedge funds (or by way of managed accounts) allocated between 5 and 8 different hedge fund strategies. The exact number of funds and strategies used may vary over time but will comprise a minimum of 20 funds implementing at least 5 different strategies.

Risk Management

Risk is assessed at both the portfolio and manager level both quantitatively and qualitatively. Quantitative measures used include standard deviation, downside deviation and returns and correlations in different market environments. Qualitative factors include an informed analysis of the manager’s knowledge and experience.

Each month analyses are run that look at the portfolio by strategy and manager to evaluate risk. The factors considered include leverage, liquidity of the instruments traded, largest risk positions, redemption provisions of the underlying managers, long/short concentration, and geographic distribution. In this way, the Investment Adviser seeks to monitor inadvertent concentrations and makes adjustments if appropriate. Capital allocated to a manager may be withdrawn or reduced for a number of reasons including:

a reallocation of assets among the Company’s investment
strategies
a change in the manager’s strategy or discipline
a significant change of circumstances with respect to a manager including changes in assets under management or the departure of key personnel
a conflict or potential conflict of interest
performance that is low relative to the performance of other prospective managers using the same or similar investment
strategy; and
identification of new prospective managers whose performance records are superior to current managers using the same
investment strategy

Manager

Dexion Capital (Guernsey) Limited

Dexion Capital (Guernsey) is responsible for the management of the Dexion Absolute Limited portfolio and has delegated certain of its duties, including making investment decisions, to the Investment Adviser, Aurora Investment Management L.L.C.

Dexion Capital (Guernsey) is the manager of London listed funds of hedge funds:

Dexion Absolute Limited – launched December 2002
Dexion Equity Alternative Limited – launched in April 2004
Dexion Trading Limited – launched in November 2004
Dexion Commodities Limited – launched in March 2006

Privacy

This policy (together with the terms of use and any other documents referred to in it sets out the basis on which any personal data Dexion Capital plc (“Dexion Capital”) collects from you, or that you provide to Dexion Capital, will be processed by Dexion Capital. Please read the following carefully to understand Dexion Capital’s views and practices regarding your personal data and how Dexion Capital treats it.

For the purposes of the UK Data Protection Act 1998 (the “Act”), the data controller is Dexion Capital.

Information Dexion Capital May Collect From You

Dexion Capital may collect personal data about you, directly (where you are asked to provide the data), indirectly or implicitly when you communicate with Dexion Capital in person, in writing, by e-mail, by SMS, by fax, when you use this website or by telephone. Dexion Capital will, however, only use this personal data in accordance with the purposes set forth in this privacy policy and is committed to protecting and respecting your privacy.

Dexion Capital may collect and process the following data about you:

Information that you provide by filling in forms. This includes information provided at the time of subscribing to any newsletter services via this website, e-mail, SMS, telephone or otherwise.
If you communicate with Dexion Capital, it may keep a record of that correspondence.

Sensitive Data

Dexion Capital does not seek to collect sensitive personal data (such as data revealing political opinions, religious beliefs or data concerning health or sex life). If Dexion Capital does seek to collect such data, your prior consent will be sought.

Where Dexion Capital stores your personal data

The data that Dexion Capital collects from you may be transferred to, and stored at, a destination inside or outside the European Economic Area (“EEA”). It may also be processed by staff operating inside or outside the EEA who work for Dexion Capital, one of its associates or for one of its or its associates’ agents. Such staff may be engaged in, among other things, the provision of support services. By submitting your personal data, you agree to this transfer, storing or processing. Dexion Capital will take all steps reasonably necessary to ensure that your data is treated securely and in accordance with this privacy policy.

Unfortunately, the transmission of information via the internet is not completely secure. Although Dexion Capital will do its best to protect your personal data, Dexion Capital cannot guarantee the security of your data transmitted to its website; any transmission is at your own risk.

Purposes Of Processing

Dexion Capital uses information held about you in the following ways:

To provide you with information including newsletters about products or services that you request from Dexion Capital or products or services offered by Dexion Capital and/or its associates which Dexion Capital feels may interest you, where you have consented to be contacted for such purposes.
To notify you about changes to Dexion Capital’s products or services.

If you are an existing client, Dexion Capital will only contact you by electronic means (e-mail or SMS) with information about products and services offered by Dexion Capital and/or its associates similar to those which were the subject of a previous sale to you.

If you are a new client, and where Dexion Capital permits any of its associates to use your data, Dexion Capital (or they) will contact you by electronic means only if you have consented to this.

By providing your residential address, e-mail address, fax number or telephone number to Dexion Capital you consent to receiving such communications by such medium.

If there is any change to your personal data which you have submitted to Dexion Capital, please contact Dexion Capital at the address below so that it may ensure its records of your personal data are accurate and, where necessary, kept up to date. Personal data shall not be retained on record for longer than is necessary for the purpose it is held.

Disclosure of your information

Dexion Capital may disclose your personal information to third parties if (i) substantially all of Dexion Capital’s assets are acquired by a third party, in which case personal data held by it about its customers will be one of the transferred assets; or (ii) Dexion Capital is under a duty to disclose or share your personal data in order to comply with any legal obligation (whether in your jurisdiction or elsewhere) or in order to enforce or apply the terms of use and other agreements, or to protect the rights and property of each of Dexion Capital and Dexion Trading Limited, Dexion Absolute Limited and Dexion Equity Alternative Limited and our customers.

Your rights

You have the right to ask Dexion Capital not to process your personal data for the purposes listed in the Purposes Of Processing section above. You can exercise your right to prevent such processing (i) by contacting Dexion Capital at the address given below; or (ii) for the purpose of providing newsletters(s) to you either by contacting Dexion Capital at the address given below or by clicking on the “unsubscribe” option found at the bottom of electronic communications relating to newsletters (e-mail or SMS) sent to you by Dexion Capital.

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Passwords

Where Dexion Capital has given you a password which enables you to access certain parts of the site, you are responsible for keeping this password confidential. Dexion Capital asks you not to share a password with anyone.

Access to information

Under the Act (and/or other relevant legislation), you have the right to access information held about you. Your right of access can be exercised in accordance with the Act (and/or other relevant legislation). Any access request may be subject to a fee of up to £10 to meet Dexion Capital’s costs in providing you with details of the information it holds about you.

Amendments

Dexion Capital reserves the right to modify sections of this privacy policy at any time. Any changes Dexion Capital may make to its privacy policy in the future will be posted on this page and, where appropriate, notified to you by e-mail.

How To Contact Dexion Capital

If you have any questions about this privacy policy, Dexion Capital’s data processing activities, or you wish to access or update the information held about you, you may contact Dexion Capital at Dexion Capital plc, 1 Tudor Street, London EC4Y 0AH.

Terms

Terms of website use

This page (together with the documents referred to on it) tells you the terms of use on which you may make use of the website http://www.dexioncapital.com (the “Site”). Please read these terms of use carefully before you start to use the Site. By using the Site, you indicate that you accept these terms of use and that you agree to abide by them. If you do not agree to these terms of use, please refrain from using the Site.

Information about us

The Site is issued and operated by Dexion Capital plc (“Dexion Capital”). Dexion Capital is registered in England and Wales under company number 4040660 and has its registered office at 1 Tudor Street, London EC4Y 0AH. Dexion Capital’s VAT number is 769 5351 85.

Dexion Capital is regulated and authorised by the Financial Services Authority (“FSA”) and is registered with the FSA under registration number 195456.

Dexion Capital is an investment services company providing a range of services including but not limited to marketing to and raising capital from third party corporate finance contacts in respect of (i) closed-ended funds and (ii) single manager funds, and advising clients on Dexion Capital’s platform of fund of hedge fund managers.

Dexion Capital is registered as a public limited company in England and Wales.

Dexion Capital is subject to the FSA rules and guidance, details of which can be found on the FSA’s website at http://www.fsa.gov.uk. The FSA regulates the financial services industry in the United Kingdom and is located at 25 The North Colonade, Canary Wharf, London E14 5HS.

Accessing the site

Access to the Site is permitted on a temporary basis, and Dexion Capital reserves the right to withdraw or amend the service it provides on the Site without notice. Dexion Capital will not be liable if for any reason the Site is unavailable at any time or for any period.

From time to time, Dexion Capital may restrict access to some parts of the Site, or the entire Site, to users who have registered with and/or have been granted passwords by Dexion Capital. Access is in any event only available to persons fulfilling certain requirements, which requirements may vary depending on the jurisdiction in which the user is. Access is prohibited to all users in certain jurisdictions.

If you are provided with, a user identification code, password or any other piece of information as part of Dexion Capital’s security procedures, you must treat such information as confidential, and you must not disclose it to any third party. Dexion Capital has the right to disable any user identification code or password at any time, if in its opinion you have failed to comply with any of the provisions of these terms of use. Where you have provided any information or representation to Dexion Capital for the purposes of obtaining a user identification code, password and/or other piece of information and such information or representation provided by you would subsequently be incorrect or inaccurate in any material respect if repeated, you must inform Dexion Capital immediately.

When using the Site, you must not use it in any way which (i) breaches any applicable local, national or international law or regulation; or (ii) is unlawful or fraudulent, or has any unlawful or fraudulent purpose or effect.

You are responsible for making all arrangements necessary for you to have access to the Site. You are also responsible for ensuring that all persons who access the Site through your internet connection are aware of these terms, and that they comply with them.

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Glossary

Alpha

The portion of an investment’s return that is not attributable to movement of an underlying index or benchmark (usually in a linear regression model). Alpha is often considered to be a measure of manager skill.

Beta

A measure the risk of an investment relative to its benchmark or index. It represents the change in investment return for every 1% change in the benchmark. If beta is greater than 1, the investment will typically gain or lose more than the index. If beta is negative, the investment will typically move in the opposite direction to the index.

Convertible Arbitrage

Arbitrageurs are simultaneously long the convertible securities and short the underlying security of the same issuer, aiming to profit from the spread between the two. Returns are generated from different cash flows and the convergence of valuations between the securities.

Correlation

The correlation coefficient is a statistical measure of the degree to which the returns on two assets are related. A correlation of –1.00 indicates that the two assets’ returns always move in opposite directions to one another, while a correlation of 1.00 indicates that they always move together. A correlation near zero suggests that returns are likely to be are independent of one another. To achieve optimal diversification in a portfolio it is desirable to invest in assets with low or negative correlations.

Distressed Securities

Managers invest in the securities of companies in financial difficulties when these securities trade at a substantial discount and the manager believes that an improvement in fortunes will materialise.

Downside Deviation

A measure of volatility that only takes into account returns below a specified threshold.

Drawdown

The largest decline in value experienced by a fund from a given point, over the indicated track record. Not necessarily a steady decline, but can even be a series of +/- returns where the negative returns are greater than the positive ones. The maximum drawdown is the largest peak-to-trough percentage fall in value over the entire indicated track record.

Equity Market Neutral

A strategy designed to exploit inefficiencies and relative valuation anomalies that involves matching long and short positions so that the fund is beta neutral.

Event Driven

A strategy of investing in a usually limited number of companies in some form of special situation such as a merger or reorganisation.

Fixed Income Arbitrage

A strategy that aims to profit from price differentials and anomalies between related interest bearing securities, often on a global scale.

Fund of Hedge Funds (FOHF)

A fund of hedge funds is a fund that itself invests in a number of different hedge funds with the aim of gaining the benefits of enhanced and more predictable performance whilst at the same time reducing the risks inherent in an undiversified portfolio. Funds of funds may be targeted at a particular strategy or geographic sector, or may encompass a wide range of individual fund styles.

GFSC

The Guernsey Financial Services Commission is the statutory body responsible for the development and supervision of finance businesses in Guernsey.

Global Macro

The classic hedge fund strategy followed by Soros and others, aiming to profit wherever the manager thinks fit, in any asset class, any country, and over any time frame.

Hedge Fund

A hedge fund is an investment fund, company or partnership, in most cases formed off-shore which is unrestricted in the range of investment styles and instruments it employs with the goal of producing substantial profits in a variety of market conditions. Hedge fund managers usually pursue a specific, focused and well-defined investment strategy.

High Watermark

The point at which a manager may accrue performance fees, the object being that no such fees are taken unless the fund is gaining NAV above any previously achieved peak in value.

High Yield

An event driven strategy that refers to investing in low grade fixed income securities of companies that show upside potential.

Hurdle Rate

The minimum return required before a manager can start to accrue performance fees, usually pitched at some measure of risk free rate.

Leverage

The borrowing of funds to increase the amount invested in any particular position in the expectation that the return on the position will exceed the cost of borrowing. Some trades target very small price spreads and a manager needs leverage to magnify these returns. Leverage both magnifies the risk of a strategy and creates an obligation to the lender that can give the lender some control over the manager’s positions.

Long / short equity

The most common hedge fund strategy involving both long and short equity positions but not with the objective of being market neutral. It is a directional strategy with the manager able to shift from net long to net short. Funds may target particular market segments or regions and employ derivatives and options to manage portfolio risk.

Market Neutral

Any strategy that attempts to eliminate market risk and be profitable in all market conditions.

Merger Arbitrage

See Risk Arbitrage.

Relative Value

A strategy that seeks to profit from pricing anomalies in related securities whereby the pricing is deviating from an historical norm or expected range.

Risk Arbitrage

An event driven strategy also known as Merger Arbitrage that involves a long position in the stock of a company being acquired and a simultaneous short position in the stock of the acquirer.

Risk-adjusted return

See Sharpe and Sortino Ratio.

Sharpe Ratio

A statistical measure of the risk adjusted return of an asset, calculated by dividing the return of the asset in excess of the risk free rate by the annualised standard deviation of its returns. The higher the ratio, the better the risk adjusted return.

Sortino Ratio

Similar to the Sharpe Ratio, the Sortino Ratio distinguishes between the ‘good’ upside volatility and ‘bad’ downside volatility in the Sharpe Ratio, using the downside deviation as the denominator.

Statistical Arbitrage

A mathematically modelled strategy that seeks to exploit mispricings in securities.

UKLA

The United Kingdom Listing Authority, a division of the Financial Services Authority, is the competent authority for listing securities on the London Stock Exchange.

Volatility

The measure of the risk of an asset in terms of the annualised standard deviation of its returns.

Fund Administration

Offshore Expertise

Dexion Capital (Guernsey) Limited is an established Investment Manager offering experienced administration and corporate secretarial services to companies and trusts. It does not provide such services to private individuals. The firm works with professional investment advisors who are specialists in their own fields.

Dexion Capital (Guernsey) has an experienced professional team with expertise in a range of open and closed-ended vehicles. The team is characterised by its commitment to develop long-term working partnerships and desire to make positive contributions to the growth and reputation of the business.

Administration

General ledger input
Recording of purchases and redemptions
Valuation production and release
Invoice processing
Interim and Annual Financial Statements

Company Secretarial

Arrangement of Board and Shareholder Meetings
Guidance in respect of regulatory environment relevant to
each client listing
Annual and periodic filing with regulators / statutory bodies

Single Manager Marketing

Focused Approach

The Single Manager Marketing team of Dexion Capital plc employs a focused approach preferring to work in long-term partnership with a limited number of single hedge fund managers at any one time.

The team does not work with managers of similar products to prevent any potential conflicts of interest.

Investors in these funds are given guidance from initial introduction through to investment with continued liaison thereafter. This differs from other purely introductory service providers.

Adding Value

Dexion Capital believes that this approach adds value to all parties concerned: The hedge fund managers benefit from the dedicated time spent marketing their products whilst the Dexion team are able to familiarise themselves with every aspect of the managers’ businesses including their:

Investment style / strategy
Investment process
Portfolio risk management
Business dynamics and structure
Hopes and aspirations

Target Institutions

Geographically, the Single Manager Marketing team speaks to investors in the UK, Continental Europe and the Middle East. Typically these include:

Funds of hedge funds
Banks
Family offices
Pension funds
Insurance companies
Private wealth management groups

Distribution & Marketing

Focused Marketing

Dexion Capital plc is a competitive force in the marketing and support of closed-ended hedge funds listed on the London Stock Exchange. Since inception in August 2000 Dexion Capital plc has raised over $4.5bn for various closed-ended hedge funds and funds of hedge funds.

The Listed Products team at Dexion Capital has responsibility for the marketing and distribution of Dexion’s four closed-ended investment companies.

The aim of the Listed Product team is to provide long term support to the companies that they work with whilst providing access to alternative investment opportunities to investors.

Distribution & Marketing

Accessibility for Investors

Dexion Capital plc aims to be independent and objective in providing alternative investment solutions to investors in both closed-ended and open-ended form.

Distribution and marketing supports both the Dexion closed-ended investment companies and Dexion Capital’s single manager marketing area.

Dexion Capital raises capital from investors in UK, Europe, Asia, Australia and the Middle East.

Marketing & Communications

Dexion Capital aims to provide consistent information and transparency to investors. Investors have varying needs and Dexion’s marketing and communications team tailors educational and manager/product related information to meet those requirements. This is done through an on-going program of web-based investor calls, monthly reports, road shows and ad-hoc communication initiatives……

Advisory & Research

Client Advisory Services

Dexion Capital plc offers institutional investors a specialist advisory service in the hedge fund sector, with particular focus on sourcing and evaluating funds of hedge fund products and their managers.

Dexion Capital recognises that many institutions initially choose to invest in hedge funds via funds of hedge funds (FOHF), a sector which can be difficult to research. Therefore it can take time for institutions to analyse this area properly and may require a commitment of resources, a development of expertise and rigorous procedures which are not readily available to most investors.

Dexion’s Advisory and Research team focuses on developing an understanding of the FOHF universe to better advise our clients on what can be achieved from their investments and the choices available to them.

Client Summary

Typically Dexion’s advisory clients are institutional investors based in the UK, Northern Europe, the Middle East and the Far East. They include insurance companies, government and corporate pension funds, sovereign wealth funds, asset and private wealth managers, private banks, bank treasury departments and family offices.

Research & Analysis

There are several ways to construct and manage portfolios of hedge funds. Different groups take different approaches to their businesses, drawing on differing skill sets and experience. Dexion Capital’s Research and Advisory team seeks to understand in detail how these can combine to give a particular FOHF manager its distinctive capability and potential to generate consistent and sustainable long term performance.

Qualitative

The Advisory and Research team spends considerable time with FOHF managers to assess their processes and evaluate the performance of their products. Typically interviewing up to 50 new managers per annum, the qualitative evaluation considers both the organisational and investment aspects of the FOHF management groups. The team believes that a complete assessment of the investment process entails gaining a good understanding of manager selection, portfolio construction and risk management methods.

Quantitative

Dexion Capital has developed an extensive quantitative database of performance data sourced from industry and proprietary analytical tools and using a wide range of performance metrics. These include data on return, risk, correlation, alpha and beta measures with respect to selected indices. Furthermore, there are a number of quantitative tools for portfolio construction and the analysis of fund returns in different market environments.

Overview

About Us

The Dexion Capital Group aims to create innovative products that meet investor needs. Operations of the Dexion Group are broadly divided into four areas:

Client advisory and research including the selection and structuring of hedge fund products with a particular focus on sourcing and evaluating fund of hedge fund products for institutional investors looking to diversify their portfolios
Marketing and distribution of listed and single manager products to a wide range of investors
Market Making Services to make markets in the investment trust sector, trading as principal on behalf of Dexion and effecting trades between clients on an agency basis (including acting as sales agent) this area will also disseminate investment research in the investment trust sector.
Fund administration and investment management

London - Dexion Capital plc

Distribution and marketing
Specialist advisory services
Investor services
Single manager marketing and capital raising
Market Making

Guernsey - Dexion Capital (Guernsey) Limited

Investment manager to the three Dexion listed products (closed-ended investment companies)
Advice and guidance to the closed-ended Boards
Company secretarial services to corporate third parties as well as Dexion’s listed products
Administration services to corporate third parties
Receiving agent services to Dexion Capital plc