Income-Oriented Investing

The need for income diversifiers: Is your portfolio providing the income you need?

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Today, traditional bonds alone may not support ongoing income needs. Income diversifiers may help you be better positioned for low yields and rising rates. 

 

 

 



Income-Oriented Investing Fixed income strategies for low and rising rates
Investment Outlook The Fed’s June meeting: Hikes continue amid geopolitical noise
Alternatives Global real estate: Avoiding the risk of home-country bias
Endnotes
This material is not intended to be a recommendation or investment advice, does not constitute a solicitation to buy or sell securities, and is not provided in a fiduciary capacity. The information provided does not take into account the specific objectives or circumstances of any particular investor, or suggest any specific course of action. Investment decisions should be made based on an investor’s objectives and circumstances and in consultation with his or her advisors.

Open-end mutual funds (MF), closed-end funds (CEF), exchange-traded funds (ETF), and separately managed accounts (SMAs) are different types of investment vehicles with different expense structures and different inflows/outflows and distribution requirements. Investment vehicles may differ in terms of specific holdings, sector weights, portfolio characteristics and portfolio performance in addition to different investment restrictions, inflows, outflows, and other related fees and expenses.
Not all separately managed account (SMA) products are available at all firms. Please check with your firm for availability. SMA accounts typically require a minimum account of $100,000 for equity and asset allocation strategies and $250,000 for fixed income strategies, although the specific minimum account size varies by program and may be subject to change. The manager may waive these minimums based on client type, asset class, pre-existing relationship with client and other factors. For certain accounts, a negotiated minimum annual fee applies. Please consult with your Nuveen Advisor Consultant for applicable minimums. Closed-end fund historical distribution sources have included net investment income, realized gains and return of capital.
Exchange traded funds (ETFs) may not be marketed or advertised as an open-end investment company or mutual fund.
Representative asset class definitions
2-YEAR TREASURY: The Bloomberg Barclays U.S. Treasury Bellwethers 2 Yr. Index is an unmanaged index representing the on-the-run (most recently auctioned) U.S. Treasury bond with 2 years’ maturity.
10-YEAR TREASURY: The Bloomberg Barclays U.S. Treasury Bellwethers 10 Yr. Index is an unmanaged index representing the on-the-run (most recently auctioned) U.S. Treasury bond with 10 years’ maturity.
30-YEAR TREASURY: The Bloomberg Barclays U.S. Treasury Bellwethers 30 Yr. Index is an unmanaged index representing the on-the-run (most recently auctioned) U.S. Treasury bond with 30 years’ maturity.
90-DAY T-BILL: The Bloomberg Barclays U.S. Treasury Bellwethers 3 Month Index is an unmanaged index representing the on-the-run (most recently auctioned) U.S. Treasury bill with 3 months’ maturity.
BROAD BOND MARKET: The Bloomberg Barclays U.S. Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market. The index includes Treasuries, government-related and corporate securities, MBS (agency fixed-rate and hybrid ARM pass-throughs), ABS and CMBS (agency and nonagency).
EMERGING MARKETS DEBT: The JPMorgan Emerging Markets Bond Index (EMBI) Global tracks total returns for U.S.-dollar denominated debt instruments issued by emerging market sovereign entities.
HIGH YIELD CORPORATES: The Bloomberg Barclays Corporate High Yield 2% Issuer Capped Index measures the USD-denominated, high-yield, fixed-rate corporate bond market and limits each issuer to 2% of the index.
HIGH YIELD MUNICIPALS: The Bloomberg Barclays High Yield Municipal Bond Index is an unmanaged index consisting of noninvestment-grade, unrated or below Ba1 bonds.
INVESTMENT GRADE CORPORATES: The Bloomberg Barclays U.S. Corporate Investment Grade Index is a broad based benchmark that measures the investment grade, fixed-rate, taxable, corporate bond market.
INVESTMENT GRADE MUNICIPALS: The Bloomberg Barclays Municipal Index covers the USD denominated long-term tax-exempt bond market. The index has four main sectors: state and local general obligation bonds, revenue bonds, insured bonds and prerefunded bonds.
PREFERRED SECURITIES: The ICE BofA Merrill Lynch Preferred Stock Fixed Rate Index is designed to replicate the total return of a diversified group of investment-grade preferred securities. The Custom Benchmark Index is comprised of a 60% weighting in the ICE BofAML U.S. All Capital Securities Index and a 40% weighting in the ICE BofAML Contingent Capital USD Hedged Index. Benchmark performance is linked. Performance prior to 12/31/13 reflects the Custom Benchmark Index’s previous composition, a 65% weighting in the ICE BofAML Fixed Rate Preferred Index and a 35% weighting in the Bloomberg Barclays USD Capital Securities Index.
REAL ASSETS: The Real Asset Income Blend is a custom Nuveen blend composed of a weighting of 28% S&P Global Infrastructure Index, 21% FTSE EPRA/NAREIT Developed Index, 18% Wells Fargo Hybrid & Preferred Securities REIT Index, 15% Bloomberg Barclays Global Capital Securities Index and 18% Bloomberg Barclays U.S. Corporate HY Index.
SENIOR LOANS: Credit Suisse (“CS”) Leveraged Loan (“LL”) is an index designed to mirror the investable universe of the $US-denominated leveraged loan market.
U.S. TREASURIES: The Bloomberg Barclays U.S. Treasury Index measures U.S. dollar-denominated, fixed-rate, nominal debt issues by the U.S. Treasury.

A word on risk
Investing involves risk; principal loss is possible. Different types of asset investments have different types of risks, which may provide higher returns but also greater volatility. Income is only one component of performance and an investor should consider all of the risk factors for each asset class before investing. Except in certain circumstances, income is generally subject to both federal and state taxes.
Fixed-income securities may be susceptible to general movements in the bond market and are subject to credit and interest rate risks. Credit risk arises from an issuer’s ability to make interest and principal payments when due, as well as the prices of bonds declining when an issuers credit quality is expected to deteriorate. Interest rate risk occurs when interest rates rise causing bond prices to fall. The value of, and income generated by, debt securities will decrease or increase based on changes in market interest rates. As interest rates rise, bond prices fall. Government Bonds are guaranteed as to the timely payment of principal and interest. However, there are other factors that can contribute to how securities react in various interest rate environments. Below investment grade or high yield debt securities are subject to heightened credit risk, liquidity risk and potential for default. The issuer of a debt security may be able to repay principal prior to the security’s maturity, known as prepayment (call) risk, because of an improvement in its credit quality or falling interest rates. In this event, this principal may have to be reinvested in securities with lower interest rates than the original securities, reducing the potential for income. Senior Loans may not be fully secured by collateral, generally do not trade on exchanges, and are typically issued by unrated or below-investment grade companies, and therefore are subject to greater liquidity and credit risk. Preferred securities are subordinate to bonds and other debt instruments in a company’s capital structure. They combine the features of bonds and stocks, and have credit risk based on the issuer’s ability to make interest and dividend payments when due. Certain types of preferred, hybrid or debt securities with special loss absorption provisions, such as contingent capital securities (CoCos), may be or become so subordinated that they present risks equivalent to, or in some cases even greater than, the same company’s common stock. The real estate sector involves the risk of exposure to economic downturns and changes in real estate values, rents, property taxes, interest rates and tax laws. Foreign investments involve additional risks including currency fluctuation, political and economic instability, lack of liquidity and differing legal and accounting standards. These risks are magnified in emerging markets. Asset-backed and mortgage-backed securities are subject to additional risks such as prepayment risk, liquidity risk, default risk and adverse economic developments. In general, equity securities tend to be more volatile than fixed income or hybrid securities, and are subject to market risk, common stock risk, call risk, and derivatives risk. Concentration in specific sectors may involve greater risk and volatility than more diversified investments. Leverage increases return volatility and magnifies the fund’s potential return and its risks; there is no guarantee a fund’s leverage strategy will be successful. Closed-end funds frequently trade at discount to their net asset value.
These and other risk considerations, such as active management, call, derivatives, illiquid investments, issuer, and income volatility risks, are described in detail in each Fund’s prospectus or at www.nuveen.com.

Before investing, carefully consider the investment objectives, risks, charges and expenses. For this and other information that should be read carefully, please request a prospectus or summary prospectus from your financial advisor or Nuveen at 800.257.8787 or visit nuveen.com. Securities offered through Nuveen Securities, LLC, member FINRA and SIPC.