A traditional balanced stock and bond portfolio currently yields well below 2%. This is leading many yield-starved investors to consider a broader range of investments, including diversifying with non-traditional income sources that have exhibited lower correlations, while maintaining an awareness of the risk/return trade-offs.
In the upcoming webcast, Income for a Better Outcome: Where to Invest in Non-Traditional Income, Jay D. Hatfield, CIO & portfolio manager at InfraCap Capital Advisors; George Goudelias, head of leveraged finance & senior portfolio manager at Seix Investment Advisors; and James Jessup, product manager at Virtus Investment Partners, will outline how these non-traditional sources of income can make a huge difference in client portfolios.
For example, the actively managed Virtus InfraCap U.S. Preferred Stock ETF (NYSEArca: PFFA) tries to generate current income and capital appreciation in a sector that may be less understood by investors. The fund invests in a portfolio of over 100 preferred securities issued by U.S. companies with market capitalizations of more than $100 million, with a focus on income. The fund may provide the potential for attractive yields and generate compelling total return results.
Preferred stocks are a class of equity security that typically pay fixed or floating dividends to investors and have “preference” over common stocks, but they are subordinated to bonds. The issuing company must pay dividends to preferred stockholders before common stockholders, and, in the event of a bankruptcy or liquidation of the company’s assets, must put the claims of the preferred stockholders ahead of the claims of the common stockholders.
Additionally, the actively managed Virtus InfraCap MLP ETF (NYSEArca: AMZA) can also help investors gain a pure-play exposure to master limited partnerships. The fund invests in midstream MLPs that are principally involved in the gathering, processing, transportation, and storage of crude oil, natural gas, natural gas liquids, and refined products.
MLPs don’t make their money based on oil or gas prices. Unlike other energy sector stocks, MLPs primarily deal with the distribution and storage of energy products, so their business model is less reliant on the commodities market since MLPs profit off the quantity of oil and natural gas they are able to move around.
Additionally, the actively managed Virtus Seix Senior Loan ETF (NYSEArca: SEIX) seeks to provide investors with a high level of current income via first- and second-lien senior floating rate loans. Senior loans are typically used for business recapitalizations, acquisitions, leveraged buyouts, and re-financing.
The ETF is sub-advised by Seix Investment Advisors LLC, which will manage investments for the portfolio. Seix seeks to generate competitive absolute and relative risk-adjusted returns over the full market cycle through a bottom-up focused, top-down aware process. Seix employs multi-dimensional approaches based on strict portfolio construction methodology, sell disciplines, and trading strategies with prudent risk management as a cornerstone.
Financial advisors who are interested in learning more about non-traditional income strategies can register for the Monday, October 25 webcast here.