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2019: A Strong Year for Income Assets, Less So for Some Income Funds

A volatile end to 2018 resulted in an overly conservative positioning going into 2019.

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Most asset classes, especially income-generating ones, enjoyed a strong 2019 after a volatile 2018. Popular dividend-payers, such as Microsoft (MSFT) and Procter & Gamble (PG), and large banks such as JPMorgan Chase (JPM) significantly outperformed. And on the bond side, the higher-yielding bond categories, such as corporate debt, high-yield, and emerging-markets debt, returned an average of 13%.

With a yield of almost 5%, BlackRock Multi-Asset Income (BIICX), with a Morningstar Analyst Rating of Silver, is one of the most income-oriented strategies among its allocation--30% to 50% equity Morningstar Category peers. This strategy leverages BlackRock’s strong fixed-income and risk-management capabilities to take a more tactical approach to asset allocation across a broad universe that includes global high-yield, bank loans, covered-call strategies, and preferred stocks. In 2018, it performed well, beating 75% of its category peers with a decline of 3.6%. In 2019, the fund's bond sleeve was well positioned--by year-end it was overweight high yield, bank loans, and emerging-markets debt, with allocations at 19%, 14%, and 6%, respectively. But the fund’s 2019 return of 13.9% lagged 72% of category peers, as the fund’s strong performing fixed-income sleeve could not overcome its below-average allocation in equities for most of the year and its underweight in the highest-returning areas of the U.S. market, such as technology and communication services.

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Patricia Oey has a position in the following securities mentioned above: MSFT. Find out about Morningstar’s editorial policies.