Campbell Dawson from Elstree Hybrid Fund (Chi-X: EHF1) notes that Australian income investors’ lives have changed, maybe permanently. The collapse in cash and term deposit rates has made things much harder than it was between 1990 and 2015 – when a portfolio with lots of cash, a few higher-yield equities and some property exposure would deliver returns well above inflation.
But now, simply buying more equities doesn’t work, because volatility goes through the roof
It is still possible to create income portfolios with acceptable volatility, but you must be more diversified. Hybrids are an essential part of building a diverse income portfolio, offering decent returns, muted volatility and good liquidity unmatched by other income and asset classes.