He says “ With headlines that call attention to the $9 trillion in global debt trading at negative yields, investors are right to be worried about finding sources of income without taking on too much risk. Given these concerns, we think investors should consider a diversity of income streams by utilizing a global, multi-asset class approach to income investing.

Indeed, finding engines of income around the world is a challenging endeavor, as the chart below shows. Central bank action, most notably in Japan and Europe, has resulted in negative interest rates to spur inflation and investment. But, as a result, absolute yields are near record lows and investors in search of income are forced to take on more risk.

We think this is where a global, multi-asset class approach can help. By looking at an array of income-producing securities and taking a flexible approach, investors may be able to navigate the challenges that face the traditional sources of income. A diversification of income sources may help satisfy investor needs. And a global approach broadens the potential universe from which to seek attractive investments.

For example, many dividend portfolios are heavily weighted with traditional income-paying sectors, such as real estate investment trusts (REITs), telecom, utilities and consumer staples. We think that investors should consider a greater diversity of income streams that includes other equity sectors (financials, health care, industrials and information technology, for example), while also augmenting the strategy with domestic and international high-yield corporate bonds and preferred stock.

Bottom line:

At the end of the day, it’s about generating income. We think the best way to accomplish this is through a diversified approach that looks globally for opportunities. By using many engines to generate income, we think investors may be able to overcome the challenges posed by today’s low- and negative-rate environment.

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Environmental, social and governance investments are increasingly appealing to investors with a social awareness.

Michael Allison, Equity Portfolio Manager at Eaton Vance says that the desire to impact positive social change has resulted in investment inflows to the ESG category:

Socially responsible investing (SRI) has come a long way in the past few decades. Initially, SRIs were largely used as a means to avoid controversial sectors, such as weapons, alcohol, tobacco, animal testing, abortion, coal or oil. SRI investing earned a stigma – deserved or not – of delivering suboptimal investment returns due to complete avoidance of some industries.

About a decade ago, if an investor expressed a concern about climate change, the course of action was often negative screening of carbon-intensive investments like coal and oil companies. The result was a fund that was typically less diversified than its non-SRI counterpart, and these funds tended to underperform the broader market.

There has been a shift in the posture of SRI investment strategies recently. Rather than using SRIs as a means to avoid sectors, investors are now more commonly using them to support companies that align with their beliefs. Once a primarily exclusionary method of investing, these inclusionary portfolios are generally referred to as environmental, social and governance (ESG) investments. Today, the most popular ESG investments are “green” funds, which prioritize companies that are environmentally friendly relative to their peers. Another common ESG focus is on companies that promote gender equality.

The desire to impact positive social change has resulted in investment inflows to the ESG category. According to a poll conducted last year by Morgan Stanley, over 70% of all investors surveyed said they were interested in sustainable investing. In the increasingly important millennial category, that proportion was 84%.

With the rise of ESG investments, investors may be able to gain more diversification than SRI funds enjoyed historically. Companies that focus on sustainability and impact management have historically shown the ability to create a stronger long-term enterprise. Thus, the distinction between traditional SRI and ESG investments is very important.

We think that investors should consider a selection of companies demonstrating a commitment to sustainability and impact practices. Fortunately, companies are more frequently reporting SRI data which is increasing in quality as well as quantity. Just 20% of S&P 500 companies issued corporate social responsibility reports in 2011. By 2014, 80% of S&P 500 companies were issuing these reports (Source: Governance & Accountability Institute).

We do note that positive screening is not insusceptible to underperformance. Even if the investor had decided to back a budding clean tech company, the clean tech industry has since gone through significant corrections over the past few years. We think that diversification is still an important consideration.

Bottom line: With the increased popularity of ESGs, we believe that SRI fund performance today is not deserving of this stigma. Investors may benefit from a professional manager who can select companies creating a stronger long-term enterprise through ESG practices.

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