Bearing in mind the UK election and the uncertainty that looks set to bring, the situation in Greece affecting Europe, the strength of the dollar – which may be holding back US earnings, he said portfolio diversification is more important than ever.
Hughes has stripped out all long UK equity exposure from his Apollo Multi Asset Balanced fund in favour of global macro strategies.
He has instead introduced long/short vehicle Henderson UK Absolute Return, run by Ben Wallace and Luke Newman.
“[That] is the only UK exposure we have, in order to play the volatility we think is due,” he said.
With correlations a deciding factor, Hughes has also introduced two global macro funds – Newton Real Return and H2O MultiReturns – a hedge fund-like strategy offered by the boutique from Natixis Global Asset Management.
He added: “We have added global macro to play this theme where correlations and volatility will be an important factor and to take advantage of those opportunities to bring diversity away from equities and away from fixed interest.”
In a further move to hedge against all geopolitical unrest, the manager has taken his gold position from zero to 2.5% of the fund, via the ETF Securities Lyxor Gold Bullion ETF, which is physically backed.
Recently gold had begun to look increasingly like a risk-on asset, but towards the end of 2014, Hughes said he recognised the precious metal had returned to behaving in a more predictable manner.
“We added gold at the end of 2014 and it has proved to be a good diversifier already this year, particularly as we have invested in US dollar terms so that has given us a little extra boost from the gold exposure.”
