Two in five (39%) UK-based advisers have moved income clients from single asset to multi-asset income funds in order to achieve more reliable long term income over the last 12 months, according to research by Heartwood Investment Management.
The firm has seen inflows into their income funds increase by over 24% in 2016 from advisers looking specifically for a global multi-asset income solution.
The research revealed that the most common income strategies rejected by advisers in favour of multi-asset income were high yield bonds, with two in three (65%) citing this option. Half (51%) said they rejected property income in favour of multi-asset income while more than two fifths (43%) highlighted emerging market debt. One in four (38%) have moved assets out of UK equity income and more than a third (35%) from global equity income.
The research revealed that three fifths (59%) of advisers said their ‘must have’ factor in choosing an income-generating investment is its ability to generate a stable monthly income. This is a modest increase on last year when 55% of advisers selected this as their ‘must have’. More than a quarter (28%) of respondents cited total return, down 7% from last year’s study.
The biggest challenge facing investors seeking long term income is the erosion of capital if markets fall and a similar amount of income continues to be taken, up from second place last year. The second and third biggest challenges are taking on more risk in order to counter the impact of continued low interest rates and bond yields, and the risk of income fluctuating.
The research shows that advisers are increasingly drawn to multi-asset income products because of their ability to deliver a smoother journey through diversification, preserve capital when markets fall, and to manage market cycles through tactical asset allocation. Indeed two in three (66%) advisers think the new pension freedoms have increased the need for reliable income solutions other than pensions.
Noland Carter, CIO at Heartwood, said: “ Global multi-asset income funds are emerging as clear favourites among advisers whose clients seek a reliable, risk-adjusted return generated by a diversified range of assets.”