For advisers, there have been two identifiable trends from the past 12-18 months.
The first – client hunger for income – is a result of the low interest rate environment and excessive monetary policy from Western governments. The second, however, stems from regulation.
The Retail Distribution Review has precipitated predictions of a surge in outsourcing from adviser businesses, either to multi-managers or discretionary managers, to allow advisers to hone in on the financial planning needs of their clients.
Multi-asset funds, as a result, have become seen as a popular way of ‘outsourcing’ the asset allocation decisions.
As these two trends blur and merge, multi-asset income funds could potentially become the choice de jour for advisers and their clients.
David Aird, managing director, UK client group at Investec Asset Management, explains: “This isn’t an argument as to whether clients should be in equities or bonds. This is about producing a product for clients that uses every available building block – the ability to look at bonds, high yield credit, emerging market debt, high quality equities with phenomenal dividend streams.
“It is philosophically sensible - the best way to generate a realistic yield is to have a diversified portfolio where you are not putting yourself in a straight jacket by only using bonds or only using equities.
“An asset allocation skill in knowing how to blend a multi-asset portfolio between these sources of income gives you building blocks that allows you to smooth the income for your clients over time.”
What’s on offer?
The number of multi-asset income funds on offer is growing, but some of the oldest in existence come from well-known investment houses such as Fidelity, JP Morgan, Investec and Old Mutual Asset Management, among others.
The latter launched its four multi-asset products at the end of last year for head of multi-manager John Ventre. The Generation range, according to Mr Ventre, address a “gap in the market” and offer investors both capital growth and a certain level of income, depending on the fund chosen to invest in.
He says: “With returns on cash and government bonds at, or near, historical lows and highly volatile equity markets, we believe that these products will form a complete outsourced solution to complement our Spectrum funds and prove to be highly popular with investors who are looking for income.”
The Generation range particularly targets those investors that are looking to enter in to income drawdown, but have concerns as to whether their pension will last.
In April last year asset management giant Schroder Investment Management entered the multi-asset income market with a global offering domiciled in Luxembourg and managed by Aymeric Forest. The fund aims to pay a distribution of 5 per cent a year in equal quarterly or monthly installments with an expected 7 per cent total return per year over a full market cycle.
