Why now for multi-asset income

Many investor portfolios are skewed towards providing a consistent income to meet their everyday needs. Dividends are a welcome reward for showing faith in a company (or an asset class) and can be distributed in a number of ways – monthly, quarterly or annually for example – while others may choose to re-invest their dividends back into the fund or funds they have invested with.

The past couple of years have seen us go from a market where income was scarce to one where it is now available in an abundance, with the Bank of England’s (BoE) base rate now at 4.25%, and the best Cash ISA still offering in excess of 4-4.5%.

But we are also living in a world where we can expect significant bouts of volatility (we have already seen a lot of that in 2025 with the impact of Donald Trump’s tariffs). The case for multiple revenue streams for income cannot be understated. Take UK equity income funds as an example – they are often seen as the cornerstone of an investor’s portfolio and at 4-5%, offer a reasonably attractive level of income. However, they carry the threat of dividend concentration, something which is often overlooked.

Read more: how multi-asset managers have reacted to tariff turmoil

Figures from computershare.com found that the top five dividend payers (AstraZeneca, Shell, British American Tobacco, BP and Unilever) in the UK accounted for over half (53%) of total dividends paid out  in the first quarter of 2024 (the top 15 actually accounts for almost 85%)*. All it takes is for one of these companies to decide not to pay a dividend for a period of time – it would have a significant impact on many income portfolios.

The benefits of a multi-asset approach to income

Step forward multi-asset income funds, which seek to gain access to income from a variety of sources and asset classes. Take equities, for example, which give you access to income streams from developing parts of the world, like Asia, where the income levels are lower but growing at a faster pace. By contrast, you can also get exposure to uncorrelated specialist equity holdings, be it care homes, aeroplanes or wind farms (these are often accessed through investment trusts).

Under the broad heading of fixed income there are diverse opportunities for owning assets which provide a high current income, such as high yield or emerging market bonds – or more defensive government bonds. Alternative real assets like property and infrastructure are ideal components for a strategy that aims to provide an attractive income stream which maintains its value in real terms, because they benefit from both a high current income, and contractual or economic protection against inflation. 

Multi-asset income strategies afford allocators a means to pull back their overall equity risk by investing in an asset class that generally falls between equity and traditional fixed income from a risk perspective. Many of these strategies were specifically developed to meet the needs of investors seeking a combination of participation in the long-term capital appreciation of equity markets, albeit with reduced swings in short-term volatility, and above-average income generation.

Research from Wellington Investment Management suggests that even for a 60% equity and 40% bond portfolio, income can potentially contribute more than half of the returns over a five-year investment horizon. For asset classes with a higher income profile, income could contribute even more — over 80% of the total return in some cases**.

Four offerings investors may want to consider

VT Momentum Diversified Income looks to produce an income of 4-6%, with the prospect of preserving the real value of capital in the long term. It invests in numerous sectors, with almost 40% in specialist assets like healthcare, and aircraft leases & sales. Following the recent tariff announcements, manager Richard Parfect says they have been adding to a number of specialist income names – citing attractive discounts and solid income returns. 

He says: “I don’t believe the names we are buying are susceptible to the first order of tariffs. Clearly the second and third tranches are harder to quantify but I do not see how this will impact digital infrastructure in Europe; battery storage in the UK; logistics/warehouses; and rents in the UK. All of which look attractively priced.”

BNY Mellon Multi-Asset Income aims to achieve a stable income with the potential for capital growth over the long term (five years or more) by investing in equities, bonds and alternatives. The fund has returned 54% to investors over the past five years and has an historic yield of 4.3%***. The fund is well diversified with just over 50% in equities and 20% in both fixed income and alternatives.

Another option is the Aegon Diversified Monthly Income fund, where manager Vincent McEntegart draws upon all of Aegon’s investment capabilities to build this multi-asset portfolio using the most attractive income opportunities the team has identified. The fund targets an attractive yield of 5% by investing across corporate credit, sovereign debt, investment grade and high yield bonds, global equities, listed property, listed infrastructure and specialist income.

Vincent says the team have been gradually taking risk out of credit in recent months, due to credit spreads reaching record lows. The team have also been focusing on shorter-duration assets, citing inflation remaining above the 2% target prior to Trump’s announcement. He also sees the potential for high yield to remain an attractive option.

Jupiter Merlin Income is managed by one of the most experienced teams in the multi-asset space. The team have made few changes following the tariff announcement, indicating they are happy with the long-term shape of this portfolio (and the others in their range). The fund currently holds around 50% in equities and 30% in fixed income, with Aegon High Yield Global Bond the largest individual holding. The fund also has exposure to property and gold****.

*Source: Computershare dividend monitor, Q1 2025

**Source: Wellington

***Source: FE Analytics, total returns in pounds sterling, 11 May 2020 to 11 May 2025

****Source: fund factsheet, 28 February 2025