The £17.8bn Standard Life Global Absolute Return Strategies [GARS] fund fell sharply in June and has yet to recover from its losses.
Ford says he has been surprised that certain themes did not play out as expected to protect the fund, including the relative strength of the dollar.
The team is looking to more "directional" strategies to cope with the changing environment in future, he explains.
"All strategies at GARS have to 'wash their own face', but some are there to generate super-normal returns when risk assets aren’t performing so well," he said.
"For example, in Q4 last year and Q1 this year, lots of different strategies were working well and some of those other diversifying strategies weren’t performing."
"In recent periods, the strategies we would have expected to perform well in this scenario didn’t do so, so we weren’t worried about what went down but questioned what didn’t go up."
GARS lost 5.67 per cent peak-to-trough in June, the third-biggest drawdown since the fund was launched in May 2008.
Performance of fund vs sector in 2013
Source: FE Analytics
As a result, the fund now trails its sector and benchmark over that short time period.
Ford says that one of the trends the team expected to work in its favour was the relative strength of the dollar versus the euro.
"In periods of poor equity performance, safe-haven currencies tend to do well, but that wasn’t the case this time around," Ford said. "The euro held up well."
Performance of dollar relative to euro in 2013
Source: FE Analytics
The team also expected larger US companies to outperform the country’s small caps when markets fell, but this did not turn out to be the case.
"When equity markets take a hit, generally small caps get hit harder," Ford said.
He adds that market conditions have been changing radically, which has thrown off these strategies. One such change is the well-documented ending of a 30-year bull market in bonds and another is the reduced importance of economic policy to markets, in sharp contrast to the recent past.
"One key evolution we are seeing is a reduced focus on monetary policy. [Mario] Draghi didn’t really do anything last year, and [Ben] Bernanke was the same: he made some general comments about reducing asset purchases."
"We are seeing a gradual move away from this focus on policy to investors focusing on fundamentals like consumer demand, capex [capital expenditure] and so on."
"In this transitionary period, we are looking for strategies uncorrelated with embedded risk premiums."
Ford says the team is concentrating more on directional strategies that will see the fund profit as long as its favoured side does better than the other.
One such strategy is the fund’s position in German equities relative to French equities, while it has taken up a position in Japanese equity relative to Korean equity.
The idea is that even if markets head down overall, as long as the Japanese market does better than the Korean market, the fund will profit.
Ford says a cheap currency should help Japanese exporters steal business from the Koreans.
These directional strategies are also helping to diversify the portfolio in a climate in which bonds are uninvestable at current levels, Ford explains.
The fund has jettisoned a couple of underperforming strategies. For a long time it has been long Russian equities, but this strategy has been rolled into a more general one playing on the strength of oil producers in the event of a spike in the price of the commodity.
Ford says that the team had expected political reforms to improve the conditions of the Russian economy, but they have not been forthcoming.
The fund has also finally sold down its holdings in index-linked bonds, which it has held since inception.
"We do not think break-even inflation levels will rise in the next three years’ time, so we exited."
Ford adds that the team has positive expectations for the US this autumn. A lot of commentators have warned the country could face issues when the debt ceiling has to be raised again this October, but he says he expects a positive outcome to be reached as it is in no-one’s interest for them to fail to reach an agreement.
On Europe, however, the team is more wary.
"We think the situation will run and run in Europe," Ford said.
"It seems to take panic before progress is made and there are enduring differences of opinion between the Germans and the rest of Europe over euro bonds, the pooling of resources and so on."
The fund has a reasonable position in UK equity, he explains, but this is more about diversification than a vote of confidence in the economy.
"It is not one of those markets like the US where we think the economy has turned the corner," he said.
The team retains a positive view on equities and property, taking its cue from head of global strategy at Standard Life Andrew Milligan.
GARS requires a minimum initial investment of £500 and has ongoing charges of 1.59 per cent.
