Chief investment officer Tony Yousefian believes the markets will test the lows seen last November and is shorting the FTSE 100 and S&P 500 through ETFs in its equity high income portfolio, UK equity and balanced managed funds.
Yousefian says: “By putting short ETFs in place, we can achieve the same objective without selling our long-only funds. Traditionally, our funds have been very high beta but by using this tactic, we can control volatility and express our view as to how we see things developing in the short term.
“On a short-term basis, we are quite confident that the market will test the lows we saw last year before we come out of this but hopefully we will not set new ones.”
OPM’s total short position equates to 6 per cent of the portfolio, comprising 2.5 per cent US and 3.5 per cent UK, reinforcing the manager’s underweight position in the latter.
The manager also has a twice-geared long play on a gold ETF and recently opened a twice-geared long play in an oil ETF.
According to Yousefian, this strategy is the only way to achieve a negative correlation with the markets within the current legal structure while suppressing fund volatility.