Official Defqto Research - Investing for Income & the Ongoing Diversification of Risk
One of the effects of the financial crisis over the past few years has been very low interest rates in the UK. With base rates remaining at an all-time low of 0.5%, cash deposits are not providing sufficient returns for investors relying on their income.
Adviser Clients who want to supplement their income will have to consider investing in assets that have some risk attached to them.
Defaqto have produced an Adviser Guide to Income Funds to assist IFAs in their ability to recommend Income Generating Funds during this period of low cash rates.
There are additional transitions taking place for Investors already seeking Income based returns, in that traditionally they have looked towards the UK Equity (as less so Bond) markets to fulfil core Income needs.
There is a growing acceptance that, although some additional volatility risk must be accepted, the Emerging Markets, are providing greater opportunities for Income Investors, and that uncertainty in the economic climate of the developed world, may make some diversification attractive.
Income from emerging markets
Emerging market investments increasingly offer opportunities to invest for income.
The potential to fulfil income targets through emerging markets is based on the following factors:
- There is an increasing focus on rewarding shareholders through dividend payments from the emerging markets at present. Dividend growth is more acute in the emerging markets than in some of the more developed markets.
- Emerging markets also offer investors for income a significant diversification across different regions and sectors. Regional and sector diversification is high on the agenda for many investors.
- There is also a higher focus on the emerging market debt sector which can allow diversity in asset classes.
These factors make it likely that fund managers will increasingly offer investors income funds from these regions.
These factors have seen Aberdeen AM, Latin American Income Fund, Invesco Perpetual, Asian Equity Income Fund, and Neptune IM, Greater China Income Fund highlighting the Income potential in the Emerging Markets of late.
Download your Free Copy of Defaqto's Guide to Income Funds now, at www.defaqto.com/adviser/ifa/guides