The rising inflation has driven income investors to search for cash alternatives and the return to normal economic activity will see inflation move progressively higher in the long term, eroding savings, according to the boutique investment house Prime Value Asset Management.
An emerging alternative for investors is diversified income or cash enhanced funds, which diversify across unlisted securities to deliver above inflation returns at the lower end of the risk spectrum, Prime’s fund manager, Matthew Lemke said.
According to him, investors were being let down by ‘no risk’ traditional cash holdings, which were going backwards against inflation.
“Quality, diversified income funds can provide more stability. They provide important ballast to a portfolio over time whilst earning an above-inflation return. This protects the real value of hard-won savings,” Lemke said.
He added that such funds were becoming more popular with investors looking for a middle ground between cash and more volatile assets.
Lemke currently manages the Prime Value Enhanced Income Fund, which aims to return the 90-day Bank Bill/Swaps (BBSW) rate plus 2% net of fees.
Boutique manager Prime Value Asset Management was founded in 1998 and is part of an investment group including Shakespeare Property Group, managing equities, income securities, direct property and alternative investments.