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Income hunt: innovative investors turn to unconventional sources

by Eleanor Lawrie on Mar 05, 2014 at 09:51

Income hunt: innovative investors turn to unconventional sources

At a time when many traditional sources of yield are failing to deliver above-inflation returns, investors face the dilemma of where to find alternative sources of income.

The relative unattractiveness of cash and Western government bonds is leading more and more investors to diversify at least part of their portfolios into more unconventional areas.

One popular income play is infrastructure, which can offer attractive yields for investors willing to pay a hefty premium.

Rob Jones, alternative funds analyst at Liberum Capital, says: ‘The attractiveness of the listed infrastructure funds, such as HICL Infrastructure GCP and John Laing Infrastructure , has been a well-documented trade.’

The sector is now trading on a 12% premium as a result.

But Jones adds that UK property trusts, which invest in diversified portfolios of secondary assets across the office, industrial and retail sectors, have until recently been overlooked by many investors. 

‘One fund that particularly catches our eye is Picton Property Income,’ he says. ‘It offers a fully covered 5% yield, trades on a single-digit premium to NAV (net asset value) and has delivered strong capital growth of late, with scope for double-digit NAV returns as the recovery takes hold.’

Green energy funds

Rob Harley, senior research analyst at Bestinvest, says investors are increasingly being tempted into alternative assets due to the lack of opportunities in what he would call the ‘core market’ such as sovereign bonds, for example.

He is also looking at alternative funds listed on the London Stock Exchange. Green energy-based funds, such as Greencoat UK Wind , offers a tempting yield at 5.85%.

Aircraft leasing funds such as Doric and DP Aircraft, are also on the radar. Payouts of up to 9% are possible with these vehicles, although investors should bear in mind they will be lower down the credit structure.

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1 comment so far. Why not have your say?

S McGee

Mar 08, 2014 at 08:38

.. it is this sort of desperation ... at these sorts of premiums .... that is cause for concern

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