In today’s low rate environment, investors are looking for higher yields in addition to steady incomes in their portfolios. To meet these goals, an increasing number of investors are choosing non-traditional income assets, such as preferred securities, real estate investment trusts (REITs) and equity option strategies.
These non-traditional assets can be beneficial because they provide relatively higher yields and have lower correlation to other assets. We believe using a multi-asset allocation approach, which includes a mix of bonds and equities, can help investors create solid and stable income. This approach may also add a defensive tilt to the portfolio during market stress periods.
Traditional and non-traditional asset classes
Asset performance and yields can fluctuate in different economic cycles. Investors can broaden their investment universe within bonds and equities which in turn provide low correlated income sources and also increase overall yield stability.
Yields of each income asset per annum (2004 - 2019)1, 2
Equity and equity related securities
A wide range of asset classes across different investment styles and regions, together with a flexible investment strategy, opens up income opportunities. A mix of asset with low correlation can provide diversification benefits and potentially improved risk adjusted returns.
Traditional and non-traditional income sources tend to be less correlated3
Based on historical data, while equities generally provide higher returns over time, they have higher volatility than bonds. Investors can use equity option strategies to potentially gain high yields through premiums while managing the risk in equities and also reduce volatility in their investments. This strategy is helpful in providing a downside buffer during periods of market stress.
During several market corrections since 2000, equity option strategies have proven to provide a downside buffer with the decline lower than the broad US equity market. This has become an important and popular risk management tool and has been widely adopted by many institutional investors.
Performance during market volatility4
Aims to generate high, stable income through multiple income sources.
(The distribution yield is not guaranteed. Distribution may be paid out of capital. Refer to Important Note 2.)
*Applicable to AA (USD) MDIST (G) Share class. A positive distribution yield does not imply a positive return.
Manulife Investment Management has more than a hundred years’ history of investing assets for Manulife’s insurance business since 1860s.
Average investment experience of management team
investment experts across asset classes
USD 165.8 billion7
in AUM of multi-asset solutions