In the risk continuum, multi-asset income funds sit just below low-equity funds. They have more latitude than the fixed-income funds, whether bond or variable term. These funds are true asset allocation funds, and have the scope even to invest 10% of fund assets in equity, though this allocation is more typically used for preference shares than for ordinary equity. The main opportunity to bring capital growth into these funds is through property. This can account for 25% of the portfolio, though it is often limited to 2% or 3%, with the exception of a few cottage businesses such as Element. David Knee, manager of the Prudential Enhanced Income Fund, describes the sector as a "smorgasbord" of different funds. It is made up predominantly of funds that used to be housed in the catch-all fixed-income varied specialist category and even a few from the old targeted-and absolute-return category. They certainly have far more leeway than the traditional income funds (which had a maximum dura...
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