Buy-write could help keep boomers afloat
As an increasing number of retiring baby boomers find themselves battling a financial storm on two fronts in the search for high income while also managing longevity risk, buy-write strategies could provide them with the safe haven they require, according to Zurich investment specialist James Holt.
Speaking on the findings of Zurich’s latest white paper, The silver tsunami and the hunt for yield, Holt explained that high income was no longer attainable from traditional sources.
“Bonds once upon a time produced 8-10 per cent yield, but in recent times have produced only 4-6 per cent,” Holt said.
He said one strategy, still fairly new to the retail market, that may meet the financial needs of retiring baby boomers was the buy-write concept.
Essentially the renting out of shares with the option to buy, these investment strategies do not incorporate debt or gearing, and, according to Holt, produce much better returns than bonds with risk levels sitting halfway between that of bonds and equities.
Holt believes investors looking for income and long-term capital growth should allocate a substantial proportion of their portfolios to a properly modified buy-write strategy.
The Zurich Equity Income Fund implements a modified buy-write strategy that is actively managed to provide a target of 10 per cent per annum income, alongside downside protection and some long-term capital growth.
Recommended for you
ASIC has released the results of its first adviser exam to be held in 2025, with 241 candidates attempting the test.
Quarterly Wealth Data analysis has uncovered positive improvements in financial adviser numbers compared with losses in the prior corresponding period.
Holding portfolios that are too complex or personalised can be a detractor for acquirers of financial advice firms as they require too much effort to maintain post-acquisition.
As the financial advice profession continues to wait on further DBFO legislation, industry commentators have encouraged advisers to act now in driving practice efficiency.
