JONES There are a few things happening. There has been a hunt for yield, which has bid up all asset prices. At the same time, increasingly our clients are aware they have to move away from traditional asset classes like equity and property to generate income flow. This is particularly relevant for the retirement cohort and, for our business, for income matching in the aged-care space. The bottom line is there is underlying demand for this asset class.

From an advisory-firm perspective, technology is also allowing us to start to access deal flow. A lot of independent financial advisers are now starting to run managed accounts, which effectively allow them to pool their clients’ money and thus act like a family office.

With the buying power this creates they can now start to access deals they were locked out of in the past because they had retail clients that didn’t satisfy the wholesale requirement. These platforms are now allowing us to hold assets and distribute them across the whole client base.

On the yield side, because asset prices have been bid up over the years our clients are starting to really assess whether they need liquidity – or at least whether liquidity needs to be the foremost component of their investment strategy.

They are starting to talk about trading liquidity for a consistent income stream, and therefore they are quite willing to sit in something for three or four years to maturity. This is a change,  ecause liquidity was a big issue as we emerged from the financial crisis. At the time, illiquid assets were associated with leverage – but this is not the case with the high-yield debt market.

MCNABB We’re seeing similar developments. We have a lot of clients who think they need to allocate more into fixed income because of lifecycle issues. These are people who generally think they understand equity and property but know they don’t understand fixed income.

These clients are starting to move from traditional asset classes – equity and property – into hybrids and
fixed income. They come to us because they feel they need someone to invest for them. They also think there’s a lack of transparency in our sector, so they need someone to ‘hold their hand’ in the process.

Getting back to high yield, we are a diversified fund and we can be 50 per cent allocated to unrated. We have been as much as 30 per cent in corporate high yield in the past. Actually, right now we’re down to zero – but only because there’s a parallel story in the asset-backed space where the banks are having to give up some of the assets on their balance sheets because of capital constraints. This creates an alternative fixed-income investment opportunity we are passing on to our investors.