“After three decades of bond rally and six years of equity market rally, you should look for other sources of return, also to prevent your client portfolios to be affected too much by the volatility which is at hand at the moment,” believes Ausfelder.
Alternative Ucits funds are Ausfelder’s preferred avenue to achieve these returns, especially on the fixed income side. “We have approximately 20% of our fixed income portfolios invested in long/short, but we will increase that when we think the first rate hike in the US is imminent,” he says.
One of the long/short bond funds Ausfelder uses is the Muzinich Long Short Credit Yield Fund. Ausfelder is not the only fund selector singling out this fund, which holds a core of sovereign bonds, combined with long/short overlays and a pocket of long/short trades.
Non-correlation to equities is Ausfelder’s most important demand when it comes to investing in alternative Ucits funds. “Since equities and bonds are becoming more correlated, you need something that gives you real protection when something goes wrong in the market like in 2008.
Click here to view part two of the video interview, where Ausfelder outlines his attitude to unconstrained bonds funds.