Investment Adviser & Investment Process

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:

  1. Manager search and due diligence – quantitative and quantitative assessments;
  2. Portfolio construction and asset allocation – seek to assemble optimal mix of managers and strategies using top-down and bottom-up analysis; and
  3. 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:

  1. individual manager risk (idiosyncratic risk)
  2. 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