However, it is in the equity income space where he is finding the best opportunities; on both a fund selection – such as Invesco Perpetual Income and Alastair Mundy’s Temple Bar Investment Trust – and a stockpicking basis.
“In equities we mainly select stocks for clients, and there are certain areas which can deliver special dividends as well as headline dividend,” said Baikie. “We hold some media names, such as ITV, and housebuilders, which are returning a lot of cash to shareholders.”
Baikie’s sentiment is reflected across the investment community, with funds in the IA UK Equity Income sector being the most-bought for the eighth month in the past 12, and is one with which Robertson concurs.
“Global equity income is about all you can do for income,” he said. “We have used index-linked and corporate bonds a bit, but we are not really getting yields on those anymore, so it is a perfect storm for income at the moment. Our stand-out fund in the area is Woodford Equity Income.”
Summers, on the other hand, is more at home on the debt side of things.
“We like a lot of credit plays, and there are quite a few investment trusts in that area that we like,” he said.
“There are two types of credit plays: very bespoke ones, such as mortgage products and so on; and then for most investors there are diversified illiquid strategies that are attractive. Generally speaking, the more diversified your investments the better, but we also hold single-asset class strategies, which are appropriate in certain situations.”
Given the uncertainty that lies ahead, could income expectations be pushed even lower going forward?
“One thing that could change yield on the equities front is dividend cuts,” said Baikie. “We have been analysing miners and oil & gas companies over the last few months, and, while dividends are sustainable in the short-term, if commodity prices stay low then we could see dividend cuts.
“Oil & gas and miners are quite a big chunk of the index, and could bring down the yields on equities as a whole. That said, bonds cannot really get any lower, while we are in a low-growth environment, it is difficult to see income going much lower than 3%.”
Robertson added: “The influential factor is macroeconomics. There is still lots of uncertainty; Greece seems to be having an election every other day, and for every step forward China takes there are two back. There is a lot going on, but once interest rates rise and bonds have shaken out a bit it should all settle down.”
