Expressing these carefully crafted asset allocation views is achieved by Mulford’s team through a combination of direct investments and third-party funds.
“For Europe, our main third-party holdings include BlackRock’s European equities fund managed by Alister Hibbert, which is top-quartile,” he says. “That fund can be very volatile, so we offset it with the JO Hambro European equities fund, which is much lower risk. Combining the two creates a great diversification and this has been a success for us.
“We use the same philosophy for Japanese equities. We have GLG Japan CoreAlpha and Schroder Tokyo,” Mulford says. “The GLG fund is excellent but because it employs a large cap value style it can be volatile, with big swings relative to the index, so the lower risk Schroders fund helps balance that.”
There is a familiar name in Mulford’s UK bonds allocation: “Our core active exposure has been through M&G Investments bond funds run by Richard Woolnough. The M&G fixed-income team is very good and well respected.”
A major concern for Mulford’s team is the possibility of a liquidity squeeze in fixed-income markets. “The bond market has doubled in size but liquidity has fallen significantly. If there is a shake-out, everybody is going to be trying to get out through a small door,” Mulford says.
“We want to make sure we have exposure to managers who have the ability to shift their fund and not get trapped in illiquid bonds, so that is where strategic bond funds have come in. They can use tools like derivatives to shift exposures if they need to.”
Hedge funds dominate Mulford’s alternatives outlook, with other options being considered more as add-ons than core holdings. “Aside from hedge funds, we do not have large alternatives holdings. Private equity, for example, is something in which you cannot get the liquidity we want for our discretionary portfolios. Some of our clients hold private equity and real estate as satellite investments outside of the discretionary portfolios.”
All things considered, it sounds as though Mulford has plenty hitting his desk right now, but far from resting on his laurels and holding what he has, he is looking forward to carving out an even bigger slice of the UK’s wealth management market for him and the rest of the UBS team.
