The case for investing in a manged income fund - May 2020
Investors may need to keep a portion of their savings in cash for different reasons. Business owners with lumpy cash flow may need to park some capital in cash to pay monthly bills such as salaries. Or, individuals who have just retired may wish to have a bucket of retirement savings that is not exposed to near-term market risk. Whatever the reason for needing access to cash in the short term (the next 12 – 36 months*), consider investing it in a managed income fund, which can deliver a better return than a deposit at a bank. Coronation offers two managed income funds for investors wanting to achieve a better return than domestic or US dollar cash. The Coronation Strategic Income Fund and the dollar-denominated Coronation Global Strategic USD Income Fund are both actively managed across the range of yielding asset classes.
Managed income funds are typically not suitable for longer investment periods. Their limited exposure to growth assets constrains their ability to provide adequate protection against the eroding effects of inflation on one’s purchasing power.
The following graphs demonstrate the benefit of maintaining exposure to growth assets over an appropriate time horizon. As is clear from the figures on the next page, cash returns become less likely to outperform equities the longer you remain invested, and investing too conservatively dramatically depresses long-term wealth creation.