Adviser focus turns to yield

Investors switch to defensive assets

By Victoria Papandrea
Fri 23 May 2008

Planners believe income and dividend yield will play a more important role in the total returns of clients' portfolios, according to research.

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With the current market outlook for slower earnings growth, advisers are focusing their attention on income and dividend yield when constructing clients' portfolios, according to a survey by Global Value Investors (GVI).

"The uncertain and volatile markets of the past 12 months have led the vast majority of financial advisers surveyed to believe that income will play a more important role in the total returns of clients' portfolios," GVI business manager William Tomac said.

The study, which surveyed more than 300 advisers, found that 83 per cent believe the income component of total returns would "definitely" (54 per cent) or "possibly" (29 per cent) play a more important role when shaping clients' portfolios.

Almost 90 per cent of advisers had made some adjustments to their clients' asset allocation in the past six months because of the changes in economic conditions, the study found. 

Of those that had shifted, 38 per cent said they had moved clients into defensive or capital-preservation assets, while 29 per cent had moved to income-focused investments.

"A focus on growing dividend income streams is an important step planners can take to insulate their clients' portfolios against volatility and inflation over the long term," Tomac said.

Advisers are more readily constructing portfolios without making reference to the index or benchmark, according to the survey findings.

In total, 62 per cent of advisers said they thought traditional benchmarks were becoming outdated as a measurement of risk and performance, while 51 per cent said they were now more likely to adopt a non-bench mark approach to risk/return for their clients' portfolios.  

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