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Mining for income

While the headlines continue to feature commentary around rising bond yields (T-Bill yields hit a decade high last week), the problem of higher inflation faced by income investors means those yields are still negative in real terms. 

The hunt for inflation-proof income has thus become the great challenge of our times.

An intuitive place to look might be within the commodities sector, though our income database indicates there hasn’t been a material increase in interest on those products.

Of course, we are referring to products such as commodity funds that offer direct exposure. 

Most allocators will have commodity exposure via generalist equity mandates.

Our database shows exposure to direct commodity funds dropped from an average of 0.8 per cent in income portfolios to 0.6 per cent between June and the end of August. 

As that level of allocation implies, very many firms have zero allocated to this space, while Handelsbanken has 6.8 per cent.

The most widely-held dedicated commodity fund among the allocators on our database is Invesco Physical Gold, which appears in the portfolios of two of the allocators we cover.

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