Overview
Interest in income investing is booming
What investors want from their money is constantly evolving and what they want from strategies designed to deliver a regular income has grown quickly more varied and more complicated over the past two decades. Pushed around by changes in markets, by economic backdrop, and by the needs of an ageing - and richer - population, even the definition of “income” can vary from one investor to the next.
Broadly, more people want their investments to deliver a regular payout as well as some growth in its overall value. But there are interesting dynamics behind that change. Different strategies will suit different demands. Luckily, the variety and sophistication of the strategies our industry offers has also grown.
In this paper we talk to a group of six Fidelity portfolio managers who deal with one or other brand of the income universe about what clients are asking, how their responses are changing, and how they should change further.
Key takeaways
- Corporate credit specialist James Durance lays out why both investment grade and high-yield credit have become profoundly popular with institutional investors over the past year, tightening spreads, and putting a premium on finding pockets of extra yield in Europe and the developing world to supplement the long-term returns of corporate credit.
- Fixed income portfolio manager Belinda Liao explains how falling domestic interest rates and the ben- efits of hedging are pulling Asian investors into other markets, and, this year, driving them further out the yield curve. After two decades of rock bottom returns, there is even yield in Japan, especially for those using currency hedging to their advantage.
- If growth stocks are not this year’s winner, then their long-doubted value peers, and regular dividend payers, may be - especially if you pick those who can make their way through another bump in head- line inflation with power over end-pricing. Equity income investors Fred Sykes and Jochen Breuer explain how their weighting of investment outside of the United States may also serve them well through the volatility.
- And after more than a decade in which equities were largely a one-way bet, 2025 makes the case loud and clear for diversification in a way few years have since the Global Financial Crisis. Multi-asset fund managers Talib Sheikh and Becky Qin lay out how they’re able to roll better with equity and bond mar- ket volatility than other strategies and what income profile their clients are getting from it.
