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Premier fund shows income success

Premier Asset Management says its multi-asset distribution fund is performing well for income investors at a time when inflation is a concern.

The firm says anyone who bought the fund for income has seen impressive results even taking the financial crisis into account.

Its multi-asset approach provides multiple sources of income, enabling the fund to take advantage of opportunities in bond markets that were created by the financial crisis.

The fund had been growing dividends until the financial crisis in 2008 and ground out an income during the aftermath.

It got back on track with growing dividends in the 2010/11 financial year, which were up 4.8 per cent on the previous year just ahead of inflation.

Premier says people cannot afford to have a fixed income if inflation is running at 2 per cent, let alone the current rate of almost 5 per cent. But those investing in Premier multi-asset distribution for total returns, a combination of income and growth, have had a more volatile ride due to the financial crisis.

Investment director of pooled funds David Hambidge says that the disciplines for investing for income and for growth are different. At the height of the crisis, it made sense to hold assets and benefit from the income, rather than bow to the pressure facing growth investors of forced selling.

Hambidge says: “The worst thing I could have done in 2009 was to sell assets and crystalise the losses. Using buy-to-let as an analogy, I would not sell a buy-to-let if the value of a property fell but the tenant was still paying rent.

“The financial crisis created opportunities in convertibles and corporate bonds at values never seen before and which we probably will not see again. If the value of bonds fell, they were still paying the coupons when the price falls, the yield goes up. If I had sold the assets I would have had to find something to replace that income at a much higher level.”

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