Within the global equity toolkit, it is clear that income funds and strategies are playing an important role. Some 88% of respondents to our global equities survey said they invest into income-focused funds or strategies.
Recent fund flows have only supported that case. According to the Investment Association, the IA global equity income sector has seen positive net retail sales in each of the 12 months to February 2023, at a time when wider equity markets have seen outflows.
This can be put down to income strategies' defensive qualities, particularly at a time of elevated inflation. More than a third of respondents to our survey said today's inflationary environment makes them more likely to upweight their allocation to global equity income.
"Unlike bonds, which in most cases pay a fixed level of interest, dividends are paid from company earnings which have the ability to grow in line with inflation," says Aditya Shivram, portfolio manager of the Fidelity Sustainable Global Equity Income Fund.
"This is particularly the case with high quality businesses with high margins and pricing power, supported by strong competitive positions, that are able to raise their prices to offset the increase in their costs."
Many of our respondents appeared to recognise this. While 23% said they use income strategies primarily for the natural income, more than two-thirds did so for their defensive qualities within a total return framework.
For more analysis of the prospects for equity income strategies, read the full survey report
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