The three areas that offer most appeal for income hungry investors after the pandemic are: corporate bonds, emerging market debt, and global equities, according to John Stopford, who jointly runs the Ninety One Diversified Income fund.
Mr Stopford said the impact of the pandemic has been to further reduce the income yield available from traditional defensive asset classes, such as government bonds, meaning investors must take some more risk in order to get the same income yield as before.
Mr Stopford’s fund has assets of £1.4bn.
He said: “The policy response to the coronavirus pandemic has accelerated pre-existing trends and pushed interest rates to extremely low levels.
"The first challenge that this presents is that investors are now yield starved with respect to defensive assets. However, attractive yield premia can still be earned across a range of asset markets and securities; the yield advantage over government bonds offered by corporate bonds, emerging market debt and global equities are compelling relative to recent history.
"In the post-pandemic world, therefore, there are many income opportunities. However, we believe it is important to cast the net wide and take advantage of a broad multi-asset opportunity set.”
Government bond yields have tumbled since March as central banks cut interest rates, and investors fear that inflation will not rise from here as the world struggles with the extra debt taken on to fund the deficit spending during the pandemic.
david.thorpe@ft.com
