“It is about enabling clients to better access our house view. The fund range we have at the moment invests in a myriad of strategies, but all within bonds and equities. We are going to add to that range by offering funds that can also use single manager, UCITS-compliant hedge funds.
“It is a fast-growing part of the hedge fund universe and they are tax-efficient for UK investors,” Mulford adds. “Our hedge fund call is all about improving client risk-adjusted returns. It’s not a case of simply ‘invest in hedge funds because you are going to make loads of money’.
“Post the quantitative easing rally, returns are going to be much harder to come by and all the easy money has been made. We also expect continued high volatility, particularly around interest rate calls. We need to find ways to lower overall volatility and hedge funds are a good way to do that. You get more return per unit of risk than other asset classes and they are uncorrelated.”
Another big focus for Mulford is developing new ways for clients to access particular investment themes independent of their core portfolios.
“Clients will have their conventional properly diversified portfolio, but they often also have some satellite money to invest, which they can use to play specific themes that are of particular interest to them.”
Top of Mulford’s list of main calls in traditional asset classes is an overweight to Europe. “This year has been all about Europe. We have been overweight European equities and high-yield bonds. We have also been hedging the currency.
“There has been a combination of factors that made us positive on Europe, a key one has been the currency weakening about 25% against the dollar. For a region in which around 40% of sales come from overseas, that is a huge boost.
“There is also the monetary stimulus from the European Central Bank and an uptick in the economic recovery.
After strategic asset allocation, our next main driver of returns is the tactical tilt, which again means putting more into Europe, and the third factor is securities selection,” he says.
