“We are cautious, but we do not believe it is doomsday. We can see the headwinds coming but also opportunities, and we are trying to find managers that are different to the benchmark.”As markets are going sideways, the firm is selective in the type of exposure it is getting and is cherry picking certain themes.
He says: “We are maintaining exposureto global insurance as a beta theme, as well as tech shares, which some would consider high risk but it is not, given the scale ofsomething like Facebook.”Hughes also keeps a low level of fixed interest, including GAM Star Credit Opportunities and Royal London Short Duration Global High Yield. Apollo has also favoured absolute return strategies as markets struggle, picking out Old Mutual Global Equity Absolute Return and Henderson UK Absolute Return funds.
Hughes has added long/short equity exposureto Apollo’s low-risk portfolio due to the upcoming EU membership vote – he followed the same strategy before the Scottish referendum – as both are catalysts for volatility in the UK. This is combined with a short position on FTSE 100 and a short position on S&P 500.
While Apollo maintains exposure to commercial property – funds from Kames, Standard Life and M&G make up 13% of the portfolio– in the first quarter Hughes reduced exposure to the sector from 20% on the back of Brexit concerns.The second major change between Q4 and Q1 is an increase in Japanese small cap, via Legg Mason, which Hughes says is up by 100% since he invested two years ago.
