The success of a diversified Investor

Marriott suggests blending property with other asset classes to maximise income

Marriott managed three of the country’s top five income-producing funds over the five years to 2008, two of which are property funds and the third one is a flexible fund, the Marriott Core Income Fund, which blends property with bonds and cash.

The numbers speak for themselves – listed property is an excellent investment choice for income-dependant investors. It not only provides investors with a high, reliable income stream (it is less volatile than income derived from cash, which is affected by interest rate fluctuations) but also provides investors with long term income and capital growth. Marriott, well known for catering for the income requirements of retired investors, suggests that an investor invests in a fund that has a flexible mandate, such as the Marriott Core Income Fund. This ‘flexible mandate’ enables the asset manager to move the client’s money into property, bonds and cash at the appropriate time, saving the client or Financial Advisor from having to time the market.

A fund which blends property, bonds and cash will produce more income for an investor than a plain vanilla income fund. By adjusting the allocation to the three high yielding asset classes at the appropriate time, the client can benefit from each asset class’s attributes. Property, for example, provides investors with a high and growing income but is adversely affected by rising interest rates. If held to maturity, bonds are the ultimate guaranteed investment, providing investors with a known income stream and capital stability. However, during a rising interest rate environment, bond values decline. Cash on the other hand is beneficial to investors during a rising interest rate environment as it provides investors with capital stability and rising income streams.

Combining these three asset classes at the appropriate times can create the Ultimate Income Solution – the goal of the Core Income fund. Marriott has actively allocated assets in the Core income Fund in accordance with these principles and in so doing this fund has produced outstanding returns. In fact,it has produced more income and a greater total return over the past five years than the top performing:

· Bond fund

· Money market fund

· Fixed Income Varied specialist fund, and

· Income fund

(Income and total return figures calculated by Profile data)

An example of Marriott’s active asset allocation can be seen in the recent move out of property and bonds, and into cash. Consequently, investors in this fund have locked in the capital growth enjoyed from property and bonds and are now enjoying growth in income as the cash investments benefit from rising interest rates.Investors who are not in a flexible fund and are still exposed to property and bonds will have seen the value of their investments decline by approximately 15% in bonds and 25% in property this year alone.

Within its property funds, Marriott reduced property exposure to the minimal levels in anticipation of declining capital values from property, while also introducing a hedge in these funds to further protect investors. Relative to other fully invested property funds, this provided a higher level of capital protection for investors.

Property is an excellent investment for income-dependant investors however, as with anything in life, timing is critical. Marriott therefore suggests that investors opt for a more diversified approach to meeting their income requirements.This can best be achieved through investing in a fund with a flexible mandate and a commitment to providing a high and growing income to investors with long term capital growth, such as Marriott’s Core Income Fund.