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“ Asia is one market which is not only a high dividend region , but also looks attractive from a valuation standpoint ,” he explained . The tracker he recommends to gain access to this theme is BlackRock Pacific ex Japan .
Laird argues : “ In my view , the current low interest rates make it more important than ever for investors to minimise charges . With yields around a couple of per cent , why pay a third of your profit to an active manager ?”
When it comes to picking passive products , LGIM ’ s multi asset fund manager Justin Onuekwusi warns investors against “ blindly chasing ” high yielding companies and recommends instead that they give proper thought to genuine active asset allocation .
“ If you go down the index route , we tend to favour smarter beta income strategies that use some form of active screen , in order to filter out those companies that are high yielding simply because they are effectively about to go bust ,” he explained .
As a result , Onuekwusi says that if you are going to manage a sustainable income portfolio of index products on an ongoing basis , you have to do it in an active way . This is because at times you will have to decrease your exposure to certain regions and sectors when the income opportunities look more stretched .
“ With yields around a couple of per cent , why pay a third of your profit to an active manager ?”
“ Using smart beta , blended with index building blocks , also helps you address the fee issue ,” he added . “ Fees are important because people are living longer and so need to sustain their pension pot
350 % 300 % 250 % 200 % 150 % 100 % 50 % 0 %
-50 % over a longer time horizon . But the building blocks do have to be actively managed to receive the sustainable income over time .”
Onuekwusi says just sticking to one asset class , such as UK equity income , will not provide a diversified income stream . This is because if there is a specific issue on the horizon with the potential to affect that asset , such as the EU referendum vote in June or the bulging fiscal deficit in the UK , your performance will be affected .
“ There are plenty of other asset classes such as emerging market debt , property and infrastructure , that allow you to spread your risk more globally ,” he continued . “ As such , using a multi asset approach is the next stage in the evolution of income investing .”•
PERFORMANCE OF SECTOR VS INDEX OVER 20YRS
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Source : FE Analytics
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IA UK Equity Income ( 308.48 %) FTSE 100 ( 219.70 %)
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