Paul Stewart from Bridge Fund Managers talks about the three unique characteristics for a successful retirement income portfolio
Fund manager insights:
Bridge Fund Managers actively construct portfolios that they refer to as “Payers” and “Growers”.
These portfolios are specifically designed and managed to deal with the dilemma of producing a high income and a growing income stream for post-retirement investors, says Paul Stewart, head of fund management at Bridge Fund Managers.
“The risks facing investors in retirement are profound due to the unique pressures that are applied to portfolios that face regular cash outflows.”
According to him, a successful retirement income portfolio demands three unique characteristics:
1. An asset allocation that is focused on growth assets (equity and real estate) to produce high capital returns in the long run and keep the capital intact versus inflation;
2. Stock selection that is focused on securities that pay regular and predictable income in the form of dividends and property income; and
3. Stocks that can grow their income over time at a pace that matches inflation to hedge the inflation risk of the income.
Stewart says once these three elements are incorporated into a single portfolio, the outcome produced for the retirement investor closely matches their liability profile and hence produces a high probability of a successful 30-year post-retirement outcome.
According to Stewart, the fund is ideally suited to investors either near or in retirement who are looking to draw a regular income from their retirement capital.
The fund is specifically designed to provide investors with a high level of income (currently above 6.5% net of costs) in the form of dividends, property income and interest income and is managed in such a way that the income grows through time at a pace that exceeds inflation.
The fund, which was previously named the Grindrod Stable Growth Fund, invests in a portfolio of equities, fixed-interest securities, money-market instruments and listed property. The portfolio’s exposure to equity instruments will never exceed 40% of the total portfolio.
“By investing in this portfolio, the retiree can manage some of these unique retirement risks in a sensible and pragmatic manner,” says Stewart.
Why finweek would consider adding it:
The fund won the 2017 Morningstar Award for the Best Cautious Allocation Fund.
It charges no performance fees and has consistently outperformed its benchmark, including over a one- and five-year period and since inception in May 2009.
The fund complies with all prudential requirements and regulations governing retirement funds. It is also available to be used as a tax-free savings plan.