Periods of persistent volatility have reminded investors that traditional asset mixes are not always enough to harness returns. The challenge for many portfolios today lies in maintaining stability. For Steve Brann, Founding Partner and CIO of Apollo Multi Asset Management, this is precisely where a disciplined absolute return strategy can make a difference.
Speaking in an interview with CapitalMarkets.net, Brann explains how experience, manager selection, and strict risk oversight form the backbone of Apollo’s multi-strategy approach. The goal is simple but ambitious: deliver consistent, compounding returns with minimal drawdowns and low correlation to traditional markets.
Key Highlights
Founded in 2008 — in what Brann calls “the eye of the storm” of the global financial crisis — Apollo Multi Asset Management began with a clear mandate: to protect capital while generating steady returns over time. Its focus has gradually evolved from multi-asset investing toward absolute return strategies delivered through UCITS-compliant, daily-dealing funds.
“The essence of our process,” Brann notes, “is about building portfolios that can perform across market cycles, not just in a single phase.” Each portfolio is divided into five distinct, investible categories — event-driven, macro, long-short equity, market-neutral, and credit strategies — creating multiple, uncorrelated sources of return.
Beyond Fund Selection: Deep Manager Understanding
One aspect that sets Apollo’s approach apart is that the team members are not merely allocators. They have direct experience managing absolute return strategies themselves, giving them deeper insight into what drives real alpha.
“We’re not just fund-of-funds pickers,” Brann emphasizes. “We’ve managed these strategies. That means we can look under the bonnet of investment managers and understand their decision-making and risk frameworks.”
This depth of understanding allows the team to avoid common pitfalls — particularly the lack of true diversification that has undermined many portfolios in volatile markets. Each selected manager must demonstrate idiosyncratic, repeatable performance and clear independence of alpha.
How Liquid Alternatives Fit in Today’s Portfolios
Institutional investors are increasingly re-evaluating where liquid alternatives belong in their asset allocations. Brann points to industry research from JPMorgan and BlackRock, both advocating a 15–20% allocation to alternatives – moving away from the traditional 60/40 portfolio.
According to Brann, this allocation enhances the return profile while reducing risk: “Our traditional multi-asset portfolios have carried up to 30–40% in absolute return, but the sweet spot for many investors lies closer to 20%.”
Importantly, he notes that liquid alternatives often occupy a similar volatility range to bonds — meaning they can be funded from either the equity or fixed-income sleeve without materially increasing overall portfolio risk.
Balancing Quantitative and Qualitative Risk Oversight
Risk management lies at the heart of Apollo’s absolute return strategy. The firm combines quantitative analysis — using internal tools alongside the BlackRock Aladdin system — with continuous qualitative monitoring through direct manager engagement.
Each portfolio is stress-tested against multiple historical scenarios, from the 2008 financial crisis to the pandemic and recent inflation shocks. But quantitative tools alone are not enough.
“Models can’t capture every risk,” Brann cautions. “That’s why our team speaks to every manager monthly, asking probing questions — for example, what would be a black-swan event for your strategy? If several managers give the same answer, we know correlations may be creeping up.”
This combination of data-driven and experience-driven oversight helps the team manage complexity without overengineering.
UCITS Framework: Structure and Safeguard
The use of the UCITS framework is another defining feature of Apollo’s process. It allows institutional investors to access hedge-fund-like diversification within a regulated and liquid structure.
“UCITS provides excellent guardrails,” says Brann. “There are strict diversification rules, limits on leverage, and robust risk management standards. Everything we invest in is daily liquid.”
He notes that in more than two decades of UCITS absolute return fund history, serious issues have been extremely rare — especially when compared to the hedge fund universe. Transparency and daily liquidity make the structure particularly suitable for institutional allocators seeking liquid exposure to absolute return strategies.
Defining Success: Cash Plus with Controlled Volatility
Performance evaluation is anchored around a cash-plus benchmark. Apollo targets cash plus three to five percent per year, with realized performance averaging around cash plus four over the past eight years.
Brann also highlights the “rule of threes” — cash plus three, volatility below three, drawdown below three.
The strategy’s correlation profile further enhances its diversification value. “When we look at our correlations, we actually have a negative correlation to the bond market, which is very positive when added to a portfolio. Our correlation to equities is very mild, almost negligible. That lack of correlation is exactly why absolute return strategies fit so well alongside traditional assets in a multi-asset portfolio,” Brann explains.
Absolute Return as a Core Diversifier
For allocators facing a world of higher volatility and lower predictability, Brann believes absolute return strategies deserve a permanent place in portfolios. Their ability to smooth the ride — through low correlation, manager diversification, and disciplined oversight — can help balance risks.
The past few years have challenged many long-held assumptions about diversification. For Brann, the lesson is clear: a well-constructed absolute return portfolio can add genuine diversification, steady returns, and resilience when traditional assets falter.
