Investors turn to income-focused products

Investors seen struggling to find valuable opprtunities alone.

30-Mar-2016

By Kristen Crawford

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Investor desire for income coupled with the current low interest rate environment had heightened interest in income-focused products, according to the latest research from Investment Trends.

The research firm’s “2015 Investor Product Needs Report”, which looked at the behaviours and product use of over 9000 Australian investors, found a large proportion, 34 per cent, of investors’ primary goal over the next 12 months was to maximise income in their investments.

However, the current low interest rate environment meant traditional income-generating products, such as cash accounts and term deposits, were less appealing to investors, it said.

"Investors are looking for a more diverse range of investments to gain their income exposure," Investment Trends senior analyst King Loong Choi said, adding that was creating opportunities for more innovative income product providers.

"Providers of income-focused investments can stimulate greater adoption of their products, with three out of four investors seeking help to grow their usage of these investments.

"Greater investor education, among other things, will be a key catalyst for realising this potential."

Bonds and fixed income exchange-traded funds featured prominently among the most common vehicles investors intended to use to obtain their income exposure in the coming year, Choi said.

Meanwhile, investors were finding it more difficult to identify domestic investment opportunities themselves, which had caused an uptick in those using professional fund managers, the report said.

Unlisted managed funds now accounted for 9 per cent of investors’ assets on average, and 15 per cent of investors said they intended to invest in them in the future, up from 12 per cent two years ago, it found.

While advisers were playing a prominent role in driving managed fund use, in recent years investing in managed funds had become an increasingly self-directed activity, with word of mouth and online channels becoming more significant, Choi said.

"Investors’ interest in unlisted managed funds is driven by their desire for greater diversification in their portfolios," he added.

"But what sets unlisted managed funds apart from other diversified investment products is their ability to give investors access to products and strategies which they cannot easily access or replicate themselves."

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