The severe headwinds to income have clearly been most acute in specific sectors, but as we start to reflect I do think we need to make an important distinction between bad luck (or the ‘unknowns’) and imprudence (or the ‘knowns’) when evaluating the income headwinds facing investors today. The pandemic is clearly an ‘unknown’ risk which has caught many, including us, by surprise. However, imprudent capital allocation is a ‘known’ risk and something that we can seek to guard our clients’ capital against.
Currency exchange: Changes in the relative values of different currencies may adversely affect the value of investments and any related income.
Emerging market (inc. China): These markets carry a higher risk of financial loss than more developed markets as they may have less developed legal, political, economic or other systems.
All investments carry the risk of capital loss. The value of investments, and any income generated from them, can fall as well as rise and will be affected by changes in interest rates, currency fluctuations, general market conditions and other political, social and economic developments, as well as by specific matters relating to the assets in which the investment strategy invests. If any currency differs from the investor’s home currency, returns may increase or decrease as a result of currency fluctuations. Past performance is not a reliable indicator of future results.
With over 200 dividend cuts, deferrals or withdrawals from FTSE 350 constituents this year, the current environment is an unprecedented one for UK income investors. The coronavirus pandemic has caused many areas of the global economy to close, impacting revenues and the free cash flow streams required to pay out income to investors.