“Most investors should hold a wide range of different fixed-interest assets which are spread globally, and then combine these with other diversified asset classes, such as property, equities and cash.
“In the current low interest rate environment, it may be this approach will not produce the natural level of income required by the client. However, the right asset allocation approach should not be compromised simply to achieve a higher yield.
“We don’t want to make calls between different fixed interest assets, so for many clients we get exposure through investing in a range of strategic bond funds, using funds with experienced managers and teams.”
Ultimately, as Stephen Crewe, director of Fulcrum Asset Management says, a strategy that solely focuses on generated income, without regard to the unintended consequences for portfolio risk will “shock investors at some point in the future”.
For clients relying on their portfolios to provide even 4 per cent income, especially clients who can ill afford to take too much market risk, such as people approaching or in retirement, it’s not just about chasing income.
It’s about chasing the right kind of income, from the right mix of assets, for the right duration and the right level of risk.
simoney.kyriakou@ft.com
