According to a recent barometer by the manager Invesco, the funds that distribute regular income also gain attractiveness against inflation.

According to a recent barometer by the manager Invesco, the funds that distribute regular income also gain attractiveness against inflation.

According to a recent barometer by the manager Invesco, the funds that distribute regular income also gain attractiveness against inflation.

Euro cent coins.

The income funds They are back in the window. These financial products, which periodically distribute (quarterly, semi-annually or annually) a percentage of the revaluation achieved by the assets in which they invest, have increased their demand as a result of the pension reform that is taking place in Spain.

According to a study on the subject prepared by the manager investco Between professional and private clients, two thirds of final investors assure that the main purpose they pursue with their portfolios is to generate income, ahead of preserving capital (51%).

Based on the evolution of the last three years, saving enough money for the retirement it remains the main task of investors when they buy financial products. Your preference has increased from 49% to 57%coinciding with the worse prospects of receiving a high public pension in the future and with the successive cuts in tax benefits in individual pension plans.

Create a emergency fund It has also become a higher priority than before (from 38% to 46%), a reality that is explained by the incidence of the Covid-19 pandemic.

The demand is there, and the supply is home. The income products have the support of financial advisors. Not in vain, 74% of investors maintain that their financial advisors have recommended these strategies to them in the last 12 months.

fight against inflation

But the income funds, which generate this distribution of benefits thanks to the coupons of the bonds or the dividends of the shares in which they are invested, not only serve to periodically monetize the profitability and obtain extra income. Because the portfolio itself continues to appreciate in value and that is crucial in an environment of zero or negative interest rates such as the current one.

“When inflation was at 0%, you could afford not to invest. But not anymore. With inflations between 3% and 4% again, the purchasing power of savers is being markedly reduced.We have to go from saver to investor”, calls on investors Inigo Escuderoresponsible for Invesco for the markets of Iberia, Latin America, US Offshore and Israel.

Historically, income funds have been built around assets such as high dividend yield stocks, lower quality bonds due to their higher yield (high-yield) or emerging securities, especially in fixed income due to their higher coupons. However, the landscape has changed.

“Today you are not looking for high coupons or dividends of 9% or 10% like before. Pursued, for example, dividends of 4% but that are sustainable and growing over timethat go hand in hand with the appreciation of the value”, explains Escudero.

Disclaim warranties

Spanish investors have also been forced to change as interest rates have bottomed out. “Today’s investor is capable of give up guaranteeing the initial capital in order to ensure retirement income”, puts the head of Invesco in context.

In this sense, the life annuities are the most attractive (79%) for customers. They are followed by bonds and fixed income funds (71%) and multi-asset funds (69%).

Escudero foresees that, with the pension reform that the Government of Pedro Sánchez is developing, “there will be much more demand for income products, with possible transfers of private pension plans to investment funds that distribute profits.”

The manager’s flagship in this area is the fund Invesco Pan European High Income. In the year before Covid, it distributed a coupon (income) of 3.04% and the rest of the portfolio appreciated by 9.10%, until achieving a total return of 12.13%. In the year of the pandemic, the coupon distributed was 2.58%, although the remaining portfolio fell -0.62%, giving a total result of 1.97%.

So far in 2021, the fund has already distributed an income of 1.79%, in the absence of the coupon at the end of November, it rises 2.54% and its total revaluation stands at 4.33%, beating inflation, no matter how high it may be temporarily.

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