Apollo Multi-Asset Management has reduced the equity exposure in its balanced fund to 41 per cent, having sailed close to its 50 per cent limit at the end of March.
The fund is focused on Asian, emerging and frontier equity markets, with modest exposure to developed Western markets. This reflects Apollo’s belief that recovery in developed Western markets is moderate at best, with potential risks coming from of currency depreciation, sovereign debt defaults and deflation. In contrast, it says developing regions are already experiencing strong domestic recoveries, with risks focused on currency appreciation, asset price bubbles and inflation.
In the balanced fund, Apollo has sold out of the £4.43bn First State Asia Pacific leaders due to concerns about its size. The proceeds were used to build a position of almost 5 per cent in the Schroder Asian total return fund, which Apollo says has been able to capture the majority of upside from the markets and significantly outperform falling markets.
Apollo has also added to an existing holding in the ETF Securities gold bullion exchange traded fund, which is now the biggest position in the portfolio at 5 per cent. Apollo expects gold to perform well as a store of wealth when there is no obvious strong currency in the world.
Fixed-interest exposure has been increased to 12 per cent in Apollo balanced, with the addition of a newly launched investment trust, HarbourVest senior loans Europe. It invests in the leveraged loans of 20 to 30 medium-sized European firms.
Apollo fund manager Tom McGrath says: “This offers very attractive inflation hedged returns by lending securely at competitive rates to companies that were previously able to secure bank finance.”