Shining a light on income investing

Clear Thinking

Our approachHeartwood Investment Management is an award-winning boutique

investment business within the Handelsbanken Group. We focus on delivering long-term real returns for clients through global

multi asset investing and have £3.7bn assets under management and administration (AUMA) as at 30

September 2018.

Providing solutions for income-seeking investors is one of our core specialisms. We aim to build

portfolios which deliver consistent income streams, capital growth and well managed

volatility.

As multi asset investors, we are able to manage money creatively and pragmatically, moving across asset classes,

countries and sectors to find the world’s best income opportunities.

Jaisal PastakiaManager, Income Strategies

Investors should not have to sacrifice capital growth or preservation in order to achieve their income needs. At the heart of our income strategies is the notion that these outcomes can co-exist.

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What we offer

A robust track record of delivering sustainable income and growing capital over the long run

Global diversification across regions, asset classes and sectors to create a stable investment journey

‘Natural’ distributions of income – we do not make pay outs from investment capital

The choice of a cautious or balanced approach to risk, and the option to withdraw or reinvest income

Receiving a stable, dependable income stream from an investment portfolio is a core goal for many investors. However, amid low interest rates, relatively low bond yields, and expensive equity markets, this can prove challenging. In the past, investors have looked to a small but consistent number of options for regular income, like quality bonds and high interest savings accounts. But with developed world bond yields and interest rates close to historic lows, these traditional products are increasingly unable to beat inflation rates and provide a sustainable income.

As a result, Heartwood is embracing a diverse range of assets to provide stable and sustainable pay outs, from global equities to ‘alternative’ assets like property or specialist credit strategies. Building income portfolios in this way ensures not only sustainable pay outs, but also the potential for participating in any positive market moves, as well as helping to limit exposure to specific market risks.

We believe that a good income solution should aim to preserve - and ideally grow - the portfolio’s investment capital, protecting from capital losses in periods of market volatility and capturing attractive opportunities as they arise.

Seeking secure income

The best income strategies are well-diversified, enabling

sustainable pay outs and capital protection in a range of market

conditions. Noland Carter

Head of Heartwood Investment Management and Chief Investment Officer

Know your level of risk

Set a sustainable level of annual income

Build portfolios designed to last for the long term

Diversify your sources of income

Understand your underlying investments

1.

2.

3.

4.

5.

Golden rules for income investors

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Today’s income landscape...

Sources: Bloomberg, as at 30 Sept 2018; Link Asset Services, Sept 2018

£4.9trn 3 stocksof global

government debt still in negative

yielding territory

account for approximately a quarter

of all payouts in the UK’s FTSE 100 index

Our income strategies are designed to offer investors an attractive total return journey. We aim to provide consistent income from a diversified range of sources, but without taking on unnecessary risk. This means growing investor capital over the long term, as well as protecting it in more challenging market conditions. We do not believe that all income investors are the same. In response to different risk appetites, we offer two income strategies – Income and Income Plus. The Income strategy is aligned with a cautious risk profile, and is designed for investors looking for a modest level of income alongside some capital growth, but with an emphasis on capital protection. Meanwhile, the Income Plus strategy is aligned with a more balanced risk profile, and aims for a higher level of income in exchange for a higher risk tolerance. Our strategies are set against specific performance benchmarks, aiming to outperform these targets over a rolling five-year period. They have a robust track record of delivering stable income and preserving capital. Instead of following specific yield targets, which can be skewed by fluctuations in a portfolio’s capital value, we aim for more stable pay outs per share, which we are able to estimate over a rolling 12-month period. For current payout expectations for the period ahead, please contact us or visit our website. Distributions from our income strategies are treated as dividends for tax purposes. Payments are made monthly, together with quarterly top ups. Investors can also choose to reinvest their income.

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Heartwood’s income strategies

Performance benchmarks (net of fees)

Targeted income levels

Risk tolerance

IncomeCPI + 2% p.a. over a rolling five-year period

Attractive,sustainable

Cautious – lower risk exposure

Income PlusCPI + 3% p.a. over a rolling five-year period

Higher, sustainable

Balanced – medium risk exposure

Source: Heartwood

Income Plus

Income

Exp

ecte

d re

turn

Lower risk Higher risk

Equities Bonds

Alternatives (Commodities, Hedge Funds, Property, Infrastructure)

Cash

Income strategies performance, targets and risk

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Heartwood’s diversified portfolios are aimed exclusively at providing a stable investment journey over the long term. We target steady, above inflation returns through a broad range of investment tools, seeking to limit losses when markets are falling while also ensuring portfolios are well placed to take advantage of opportunities when markets are rising. As part of our process, we draw on our proprietary investment framework, which takes into account our place in the current cycle. Using this framework as a guide, we focus on the most compelling medium-term investment opportunities. Any risk to investment capital is a key concern for us. If the core capital of a portfolio becomes damaged, then generating a steady level of income becomes increasingly challenging, regardless of good decision-making thereafter. We believe that income investors should not need to increase capital risks to achieve a sufficient level of income. Since the performance of single asset classes can fluctuate dramatically, diversification is a crucial

part of long-term portfolio construction. This is especially true of our income portfolios, where we are seeking to protect not only investment capital, but also income flows. As multi asset investors, we can move across a broad spectrum of asset types and geographies to ensure robust income streams, capital growth and diversification. As well as traditional holdings, our portfolios invest in alternatives and specialist strategies, accessing opportunities previously unavailable to most investors. Taken together, this approach can smooth the path for income seeking investors, helping them to rest assured that their income is sustainable, and that their capital is well tended.

A pragmatic, creative investment solution

Portfolio diversifiers

Precious metalsHedge fundsPut options

Capital growthEquities

Hard commoditiesEnergy commodities

Income streamEquitiesCredit

Property

Source: Heartwood

To find out more please get in touch:

London OfficeNo 1 KingswayLondonWC2B 6AN

Tel: 020 7045 2600www.heartwoodgroup.co.uk

This brochure is printed on 100% recycled paper.

Important InformationHeartwood Investment Management is a division of Heartwood Wealth Management Ltd which is authorised and regulated by the Financial Conduct Authority (FCA) in the conduct of investment business, and is a wholly-owned subsidiary of Handelsbanken plc. This brochure has been prepared by Heartwood Investment Management for clients and/or potential clients who may have an interest in its services. It is not an offer or invitation to buy or sell securities and nothing in it constitutes advice to undertake a transaction. Professional advice should be taken before investing. Heartwood Wealth Management Ltd will select or recommend those investments that we consider appropriate for inclusion in each portfolio. When Heartwood Wealth Management Ltd provides advice in relation to investment, its own investment management services will usually be recommended. When advice on pensions or other products outside an investment management relationship is required, Heartwood Wealth Management Ltd will recommend products chosen from a limited selection of providers that have been appointed on the basis of its judgement in their quality of service, investor protection, financial strength and, if relevant, their financial performance. As a result, any advice given by Heartwood Wealth Management Ltd in respect of retail investment products will be restricted as defined under the FCA rules. Portfolios may include individual investments in structured products, foreign currencies and funds (including funds not regulated by the FCA) which may individually have a relatively high risk profile. They may specifically include hedge funds, property funds, private equity funds and other funds which may have limited liquidity. Past performance is not a reliable indicator of future results. The value of any investment and the income from it is not guaranteed and can fall as well as rise, so you may not realise the amount originally invested. Where an investment is denominated in a currency other than sterling, changes in exchange rates between currencies may cause investment values and/or income to rise or fall. Registered Head Office: No.1 Kingsway, London, WC2B 6AN Registered in England Number: 4132340 Part of the Handelsbanken Group