Moukarzel’s clients are mainly from the Middle East, and traditionally have the bulk of their money invested in bonds. Triggered by the low yields on investment grade bonds, he moved part of his clients’ money to emerging market debt and high yield funds a couple of years ago.
“After that we moved our clients to multi-asset and equity income funds, and last year we went into unconstrained bond funds,” he explains. “We are moving them along the curve in that sense.”
Now, ‘at least half’ of his clients’ bond fund exposure is in unconstrained bond funds. One of the funds in this space that he particularly likes is the Pimco Income Fund. “We have a large position in this fund, and I have nothing but good to say about it.”
His preference for unconstrained bond funds fits with his overall philosophy to outsource those parts of the investment process he thinks other people are better at. “What we do ourselves is what we can do. For what we can’t do, we prefer to find the best people out there to do it for us. Firms like Pimco, Fidelity and Blackrock have huge resources which we don’t have,” he explains.
Multi-asset funds are another, less recent addition to Moukarzel asset allocation mix. “They have allowed our clients to migrate away from pure bond funds to mixed-asset portfolios.”
Moukarzel is not worried that the fading negative correlation between equities and bonds is undermining the investment case for multi-asset funds. “This is a strange market altogether. There are a lot of things that don’t meet the historical norms. In my view, correlations come and go. I just look at each asset class and work out what are the best strategies going forward given the risks that we see,” he says.