At various stages in life, the need to generate a steady income stream may assume greater importance than at other times. That can be challenging in a low interest environment that allows for little or no return on savings.
It may be you are in, or nearing, retirement or simply want to build in an element of inflation protection. Where it becomes clear that you wish a particular focus on income generation with only modest capital growth, your investment manager will discuss with you how an improved level of income can be achieved at a level of risk that is acceptable to you. This will come from the range of investments selected in an Income Uplift portfolio– largely from income producing assets – what will include a mix of equities (usually making up around 25%) as well as other assets including bonds, investment property funds and alternative investment funds.
Case Study
After selling a business that she had co-founded, this entrepreneurial client engaged with us to look at options for the sizeable sale proceeds she had received. Her intention was to start another new business with part of the proceeds, and then apply the rest of her capital in a way that would allow her to enjoy a comfortable and enjoyable lifestyle.
“When speaking to the client, it was clear that she was determined to start a new business but, as with any new venture, was keen to keep expenditure low. As a result, she was not planning on drawing a salary. As discussions progressed, it was clear that a focus on capital preservation (to balance the risk of the new business) and sustainable income (to fund her lifestyle) were a vital component of any investment strategy.” (Investment Manager at CS)
Time was spent looking at her financial requirements and what level of income would be needed from the portfolio to cover these. The answer was to manage her portfolio on our Income Uplift strategy, which is designed to provide an enhanced income level stream, comfortably ahead of rates available on cash deposits.
“When looking at income-focused investments, our investment strategy will employ a combination of valuation and earnings quality analysis to help achieve the objective of providing an attractive and growing dividend yield. Additionally, we look for strong inflation linkage, with many of our investment property and infrastructure holdings’ income reviewed annually, with upward only rent reviews, usually linked to CPI (Consumer Prices Index) or RPI (Retail Prices Index). This is all the more important in a high inflation environment to protect the real value of client portfolios and income”. (Investment Manager at CS)
The result was the client had a portfolio that was providing a steady, sustainable income while preserving the capital value, allowing her personal monthly expenditure to be covered without the need to take a salary from the business.