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A prolonged era of low returns could leave government [...] facing rising demand for social services and even income support at a time when public finances are already under pressure.
McKinsey & Company Study, 2016 May
If the search for income has been an important concern in the life cycle for a long time, structural challenges are changing the investment landscape and driving income demand as a main preoccupation. To better understand these challenges, explore the 4 explications below.
The demographic challenge is getting worse. Indeed, the population is not only getting older, but also living longer. The number of elderly people is forecast to increase meanwhile life expectancy is expected to grow : from 71 years in 2015 to 77 in 2050.
More pensioners living longer, and less workers able to support them, may lead to reforms of the pension systems.
The public debt burdens, especially in advanced economies, are a long-lasting legacy of the global financial crisis.
What is the impact for income? The pension and healthcare models of advanced economies are already jeopardized. With even public debt burdens, governments could be under pressure to reduce their debt by cutting welfare expenditure. Income can be an answer to anticipate these kind of measures.
Increased regulation is a crucial trend. Since the financial crisis, many regulation constraints have been implemented, such as Solvency II, affecting financial institutions including insurance companies and pension funds. As a result of regulatory pressures, these companies have less risk appetite, resulting in declining annuity rates in an environment where low interest rates already reduced retirement income.
We expect an increasing income needs for households, especially for the middle class, since several factors stimulate it. The inflation for some relevant goods and services such as rent, healthcare, child care are becoming unaffordable. In addition, in some European counties, the young unemployment issue is still essential, and translates into a massive number of young adults living with their parents, fostering the needs for additional income to maintain unemployed children at home and pay for their education.
We’re in a world of low yields, tighter credit spreads and potentially higher risk on bonds. In order not to erode their household wealth, it’s necessary for clients to broaden their perspective. With Amundi, investors can rely on a leader’s experience to explore a wide range of potentially yielding investment opportunities across different asset classes.
In a period of income shortage, equities can be a relevant alternative to traditional income sources. Indeed, dividends can potentially provide attractive yields. Equities may also present the interest to aim income generation combining capital growth, thanks to equity market participation.
With a wide universe composed of various asset classes, multi-asset solutions are well adapted to bridge the income gap and look for income wherever it is, while taking full advantage of diversification to manage the risk.
Facing the situation, Amundi created a tailored and complete range of solutions able to answer to your needs as well as to the market challenges. So that Amundi has relied on the best income’ expertises of its teams, including the high experience of Pioneer and First Eagle ones, to offer you strong solutions.
A multi-asset solution aiming to deliver a target distribution 2017 of 5.25%1. It offers the prospect of real returns through flexible and active investment in a broad range of real economy sectors.
A multi-asset and core long-term wealth solution aiming to deliver a quarterly coupon of 1.25% for distribution share classes2. The fund aims capital growth and regular income to protect future income against inflation.
An innovative multi-asset solution aiming to deliver a target distribution 2017 of 5%1. It looks for a sustainable income higher than traditional bonds, with a lower volatility than equity markets, enhanced through option writing.
An equity solution which aims to combine a target distribution 2017 of 6.75%1 and equity market participation investing in a diversified basket of high-yielding European equities enhanced through option writing.
A global equity portfolio investing in a global universe to increase opportunities for income potential and diversification.
1This target income can be exceeded or undershot and should not be construed as an assurance or guarantee. Distribution dates are set on an annual basis and will be paid pursuant to the frequency of the unit class. The term Distribution refers to the income paid in any particular year. Treatment for tax purposes may vary depending on the jurisdiction. Please consult your tax adviser in order to understand any applicable tax consequences. Income target and distribution is gross of fees.
*Source: Pioneer Investments as at 30 December 2016: Forecast for full-year 2017. The portfolio’s target return is adjusted annually. The income earned is distributed quarterly or semi-annually. Please note that the actually achieved value may deviate significantly from the forecast (also to the downside), especially in periods of pronounced market fluctuations. This target income can be exceeded or undershot and should not be construed as an assurance or guarantee.
2The payment of a dividend following a predetermined frequency and percentage of the net asset value (“Fixed Dividend”) may result to have the dividend composed of capital attributable to the Shares, whose amount will be driven by the amount of existing investment incomes and capital gains. Fixed Dividend will seek to pay out a dividend regardless of the performance of the Shares. As a result, the net asset value of such Shares may fluctuate more than the other Classes of Shares for which it is generally not intended by the Board of Directors to distribute capital, and the potential for future appreciation of such net asset value of such Shares may be eroded.