New research among financial advisers and wealth managers by TIME Investments, which specialises in alternative asset income funds and asset-backed investments, reveals that 32% said that over half of their clients have seen a decline in the income generated by their investments as a result of the fall in shareholder dividend payments by listed companies during the COVID-19 pandemic.
With more than a quarter (28%) of the investment professionals expecting the trend for cutting dividends to continue for another two years, traditional sources of income such as equity income funds will continue to struggle to provide both attractive and dependable returns, whilst the interest on high quality fixed income assets grinds ever lower. The pressure on investors’ pockets looks set to continue for some time to come.
As a result, advisers are reporting a growing interest in real assets as a source of income for long term investors. Against the backdrop of extremely low interest rates, just under half (46%) said they have seen a significant increase in clients taking cash from savings accounts to invest in alternative asset classes to help generate better returns.
In the search for income, the research shows that a third (32%) of advisers are recommending an increased exposure to real assets such as infrastructure and real estate, one in four (26%) have increased their recommendations for investing in renewable energy, and 24% are increasingly recommending long income property.
However, the ongoing interest in equities and fixed income continues, with 50% of advisers recommending UK equities which are still paying dividends (50%) and 38% are suggesting corporate bonds.
Stephen Daniels, Head of Investment at TIME Investments said:
“Traditional sources of income have taken a hit during the COVID-19 pandemic and our research suggests that investors are willing to diversify away from traditional income paying assets to alternatives that continue to pay attractive levels of income.
In these uncertain times, less volatile and uncorrelated real assets such as infrastructure, property, and renewables are becoming increasingly popular as investors seek relatively stable sources of income that can be substantially higher than can be achieved by leaving cash in the bank. Just recently, the Bank of England has taken a step closer to introducing negative interest rates, by opening up discussions with banks on this ground-breaking policy.”
TIME Investments says income from traditional asset classes is becoming increasingly hard to find. Fixed income fails to deliver attractive returns and the volatility of equities continues to be a challenge. In order to avoid compromising on clients’ income requirements, advisers must make a conscious decision to look beyond traditional income assets to alternatives for reliability, stability and attractive risk-adjusted returns.