Growing demand for income products targeting retirees

Modest returns from cash and fixed interest investments coupled with an ageing population has led to growing demand for income products targeting investors on low marginal tax rates, such as retirees, according to research house van Eyk.

According to van Eyk’s review of Australian equities, the current economic environment has also had an impact on the rising popularity of this strategy.

van Eyk investment analyst John Wong said investors aiming to generate income from investing in sectors such as banks and listed property trusts may have to reassess the risk of their investments given recent volatility in Australian equities.

“van Eyk believes equity income strategies offer an alternative investment solution to investors who want stable income, conservative capital growth and investments that offer some defensive characteristics,” he said.

According to van Eyk, equity income managers should seek to deliver 2 per cent above the gross dividend yield of the S&P/ASX200 index.

“The performance of equity income strategies is likely to vary under different market environments. Under strong bull market conditions, most equity income managers are expected to underperform the broader equity market… In general, income strategies are better suited to bear or range-bounded markets.”