Dexion Absolute vote not show of confidence say analysts

Dexion Absolute shareholders who voted for continuation yesterday were likely to be motivated by a desire to avoid being stuck in an unlisted run-off fund, say analysts.

Sterling  shareholders yesterday voted by an overwhelming margin to stay invested in the fund while the dollar , euro and Australian dollar shareholders voted to redeem.

Numis analysts Charles Cade said he was more inclined to view the sterling vote as a judgement on the alternative – moving to an unquoted, illiquid run-off vehicle with an uncertain timetable for realisation – than a vote of confidence in managers, however.

Cade said: ‘On the face of it, the level of support from holders of the sterling share class was overwhelming.

‘However, the sterling line is owned primarily by UK-based wealth managers and we believe that the possibility of ending up with an untradeable realisation vehicle was unappealing.

‘In our view, these shareholders remain unhappy about the discount of more than 20% and though there is no obligation to offer redemption proposals, the Board/Dexion Capital remain under pressure to return further cash.’

The managers of Dexion have said that they were required to move the run-off fund off the markets for tax reasons, but Numis said that the situation was not clear-cut.

A detailed analysis of the fund’s liquidity profile, cross-compared with the need to maintain a balanced portfolio, suggested that 44% of assets could be realised by January 2010 at a September 2009 valuation.

A further 25.2% could be returned by April 2011 on a December 2010 valuation, with the timetable for the remaining 29.9% of assets uncertain and likely to be longer.

The sterling share class portfolio has lost 12.20% over the last year while the shares at running at a 23.3% discount to net asset value at 105p.