Equities have traditionally been referred to as a ‘growth’ asset class, but are increasingly being considered for their income characteristics. This follows many years of yield compression across traditional income asset classes, to levels that have fallen short of meeting investors’ income requirements. At the same time, investment providers have pushed ahead in developing more tailored solutions for post-retirement investors. This trend has further contributed to the increasing penetration of equity income strategies in many clients’ portfolios.
In this paper, Rudi Minbatiwala, Head of Equity Income, examines how the income concept is managed in more traditional income asset classes. Lessons learned from understanding how these traditional income assets are analysed are applied in considering some important implications when seeking to generate income from equities. The paper argues that when it relates to equities, income needs to be considered as a long-term concept; a total return focus is critical in order to meet the required outcomes of retirement income strategies.