Advisers and wealth managers building multi-asset income portfolios can use equity allocations in different ways due to higher bond yields, according to the guests on the latest edition of the FT Adviser podcast.
This week's podcast looked at the various ways in which higher bond yields can impact an equity allocation and the trade off between higher yields and higher growth potential among individual stocks
Appearing on the podcast, John Moore, senior investment manager at RBC Brewin Dolphin, said: “For much of my career, bonds were there for the income, and equities were more about growth. Then came the global financial crisis and that was almost reversed.
"But with government bond yields back as a source of income, there is more headroom now in terms of what you do with the equity allocation.”
Will McIntosh Whyte, multi-asset investor at Rathbones, said higher bond yields means he can own fewer equities in income portfolios.
Also, there is less pressure to own the most high yielding equities, particularly where those yields may not be sustainable over the long-term.
Mark Peden, global equity income fund manager at Aegon Asset Management, said higher bond yields are a function of higher interest rates.
Higher interest rates mean equity portfolios should have less debt, and growth type equities are likely to be less attractive in such an environment, as they tend to be priced relative to the risk free rate.
You can listen to the podcast by clicking on the image above.
david.thorpe@ft.com
