These have included infrastructure, leasing and property investments, such as student lets, NHS clinics, renewable energy assets and aircraft leasing.
Mr Coop says the problem with some such assets is that “you are almost providing an insurance policy for the owners of the asset in exchange for an income now. But what can happen is that at some point in the future the insurance gets called in, and that is when the asset price falls and the investor suffers”.
Mr Klempster says: “The way markets typically work is that if a quality asset is trading at a high yield, then investors step in and buy the asset, pushing the price of the asset up and the yield down. So if you see an asset that has a 6 or 7 per cent yield for an extended period of time, then you have to ask why.”
This is why it is important not just to focus on income, but capital; not just on diversification of assets, but of income streams; and not just on finding alternatives, but on how those alternatives fit into a risk-managed portfolio.
Shane Balkham, chief investment officer at Beaufort, says: “Of course investors in retirement will be focused on the diversity of the income streams they are earning. But it is also important to focus on the liquidity of a portfolio, and that is something to be mindful of with alternative income products.”
Building such diverse income-generating assets into a multi-asset portfolio needs to take into consideration the client’s own risk tolerance and individual circumstances.
Simply diversifying into more risky stocks to generate that income is not a true multi-asset strategy for those in retirement.
David Thorpe is special projects editor at FTAdviser and Financial Adviser
