Multi-asset Income Funds
Since the new Pension rules came into force there has been a renewed interest in what are called multi-asset income funds. Unlike specific equity or bond funds a multi-asset income fund includes investments from a wide range of different asset classes such as equities, bonds, commercial property and alternative investments such as emerging markets. This gives the fund the benefit of diversification and should make it less volatile, a key consideration when investing for income.
One of the key risks associated with managing your own pension pot for regular income is the possibility that the stock market will fall shortly after you have retired and you will need to cash in more shares in order to meet your desired income level (see more about this in our Risks section). The purpose of a multi-asset fund is to hold a broad range of asset classes so that if one class suffers a fall, there is enough diversification to continue paying an income.
There is no investment category specifically for multi-asset funds and you will find them all across the IMA classes. This makes them difficult to compare, as does the wide variety of approaches taken by the funds. For a primer on multi-asset funds you could do worse than look at the rather clever ‘flip book’ prospectus for the Premier Multi-asset retirement income funds. This is an example of how a fund provider has created a fund specifically for the retirement market. It focuses on capital protection, paying out just the natural yield, and pays a dividend every month. There are an increasing number of such retirement specific, multi-asset funds being launched, and advisers are starting to consider them in constructing low volatility, regular income portfolios for their clients.