Every week, we’ll profile a high yield investment fund that typically offers an annualized distribution of 6-10% or more. With the S&P 500 yielding less than 2%, many investors find it difficult to achieve the portfolio income necessary to meet their needs and goals. This report is designed to help address those concerns.
With the U.S. economy in pretty good shape at the moment and many foreign economies struggling to stay out of recession, you might think that’s a good reason to avoid anything other than U.S. securities. Actually, it’s the opposite. It’s a great case for global diversification. Instead of trying to pick winners and losers, a global portfolio can smooth out both returns and risk, something which investors should be seeking out, not avoiding. Plus, there’s the very real possibility we see a reversion to the mean - overvalued U.S. assets start to correct just as foreign investments bottom and initiate a new rally higher. Diversification helps you avoid missing anything.
The same thing goes for stocks & bonds as well. Although you wouldn’t think it based on recent returns, stocks and bonds still have a long-term relationship of moving opposite each other and, again, diversifying away some portfolio volatility. Therefore, it makes some sense to try to weave all of these things together in a single product if you can find one that works. That’s why the Nuveen Multi-Asset Income Fund (NMAI) is particularly intriguing. Not only does it address the U.S./international and stock/bond mixes, it adds in other non-traditional assets, such as senior loans and asset-backed securities. It makes for a really nice, well-rounded high yield portfolio if it’s constructed properly.
Fund Background
NMAI’s investment objective is to provide attractive total return through high current income and capital appreciation. It dynamically invests in a portfolio of equity and debt securities of issuers located around the world. This dynamic investment strategy uses a risk-based framework in which any amount can be allocated to an asset-class at any time and invest in equity & debt securities of any type without limit. The fund also uses leverage to enhance yield and total return potential.
If you like the ultimate in flexibility, this might be the fund for you. While its mandate may allow it to invest in virtually anything in any quantity, I generally expect it will stick with a 60/40 stock/bond allocation and a 60/40 U.S./international allocation (with the ability, of course, to tilt in either direction). I don’t expect to see it move 90% into senior loans or anything, but a flip to 40/60 stocks/bonds might not be out of the question. In 2022, NMAI saw 129% portfolio turnover, but in the first half of 2023, it was only 19%. I guess the takeaway is that perhaps the fund’s managers really will make more significant pivots over time, but given that the fund just launched in 2021, we don’t yet have a lot of history with which to work. The fund’s 26% leverage is relatively modest, but the expense ratio of 2.53% is on the high side.
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