Apollo Multi-Asset Management is focusing on investments that are capable of producing above-average growth in a low-growth environment because it expects growth in developed markets to be anaemic.
The multi-manager has invested in absolute return funds from Eclectica and Jupiter to insulate its portfolios from global equity market volatility.
The CF Eclectica absolute macro fund is a multi-asset absolute return that has performed well during the recent volatility. It was up by 3.23 per cent during August and the Jupiter absolute return fund also held up well during the month when many funds lost money.
Apollo says bond markets, where yields are close to all-time lows, seem to be pricing in a greater probability of recession. The multi-manager is underweight gilts, treasuries, Japanese government bonds and German bonds as it sees bond markets as overvalued and expects a sell-off toward the year-end.
Equity markets also seem to be pricing in the likelihood of a recession following the recent correction but Apollo feels the global economy will muddle through. It expects developed equity markets to recoup some of their losses by the end of the year because they seem to have already priced in a recession but the multi-manager doubts these markets will reach the same levels as in the middle of July.
Apollo fund manager Steve Brann says: “The underlying problem of over-indebtedness in many countries will take many years to ease and cannot simply be fixed overnight. Having said that, equities do seem to offer compelling valuations based on future earnings and relative to fixed interest.”