Bonds
The third area are bonds, which have typically been a core part of portfolios through retirement given their lower volatility and predictable cash flows.
The past few years have seen bond markets experience some of the largest losses in decades, if not centuries, given high levels of inflation and rapidly rising interest rates.
Investors should typically have a lower proportion of their portfolios in bonds before retirement but there is still a place for some exposure.
High-yield bonds have performed strongly over the long term and have delivered equity-like returns with lower volatility.
The Baillie Gifford High Yield Bond fund offers exposure to global bonds while offering an income return of nearly 6 per cent.
Government bonds also look highly attractive, with UK 10-year gilts offering a 4.4 per cent annual return if held to maturity. Given that interest rates are likely to fall in the coming months, investors should be increasing exposure to this area.
Investment trusts
Investment trusts are the final area that can be used to improve retirement portfolios, irrespective of whether you’re accumulating or decumulating.
Investment trusts have a long and rich history in the UK and can provide diversification and differentiated returns to portfolios.
Trusts have faced a number of headwinds over the past few years, notably the higher interest rate environment, misleading costs and charges disclosures and wealth management consolidation.
These issues have led trusts to be trading at very wide discounts to their net asset values, providing the opportunity for enhanced long-term returns.
Private equity, commercial property and infrastructure are favoured areas, and are asset classes that most portfolios don’t have exposure to.
ICG Enterprise Trust provides broad private equity exposure while yielding 2.7 per cent and standing at a 37 per cent discount to its net assets.
For commercial property we would favour Urban Logistics REIT, which invests in the structurally growing area of warehouses, yields 6.3 per cent and trades at a 25 per cent discount.
Finally, infrastructure investment trusts provide high levels of income, and we gain exposure to a broad mix of these via the ARC Time UK Infrastructure Income fund.
The fund is run by the experienced manager Stephen Daniels and gives differentiated returns alongside a 6 per cent yield.
There are plenty of investment opportunities for retirement portfolios at the moment and having exposure to the above areas should help investors on their journey to having a happy retirement.
Dan Boardman-Weston is chief executive and chief investment officer at BRI Wealth Management
