The Case for Global Income

Global income strategies offer a compelling value proposition for investors: a steady stream of income generated from dividend-paying equities, government bonds and structured instruments like equity-linked notes (ELNs) from around the world. Rather than relying solely on price appreciation, this approach prioritizes regular cash returns, which can help smooth overall portfolio risk and generate returns even when markets are flat or declining moderately.

• Global equities contribute dividend income and exposure to companies with the discipline to pay and grow distributions over time. This is often a sign of stronger balance sheets and more consistent cash flow management.
• ELNs can further enhance income by blending fixed-income-like coupon payments with equity-linked upside potential.
• Global government bonds add a complementary income stream, typically offering more predictable coupon payments and lower volatility. It also adds a diversifying counterweight to equity risk.

Casting the search for income across asset classes and geographies broadens the opportunity set and can reduce dependence on any one market, currency or interest rate environment. A global income strategy offers diversification and varied risk-return exposure, making it a versatile tool for investors seeking both income and long-term total return.

Equities

Dividends Are the Quiet Engine of Long-Term Returns

Global income strategies typically focus on dividend-paying companies. Dividends have historically been a major driver of long-term equity returns. From 1926 to 2025, dividends contributed approximately 31% of total return for the S&P 500.¹

Compared with broad global indexes, dividend-paying companies have higher representation in sectors such as financials, industrials, utilities, telecoms and health care. This reduces reliance on mega-cap technology and high-growth, low-yield companies.

Why global? The US market is heavily concentrated in technology and communication services, which pay low or no dividends. Income opportunities are often strongest outside the US, particularly in sectors where dividend yields and payout discipline remain attractive. Non-US markets also trade at meaningful valuation discounts to the US, and payout ratios outside the US are generally higher. For income investors, the opportunity set is genuinely global, and we believe the most attractive combinations of yield, valuation and dividend durability are currently found across Europe, the UK, Japan and select emerging markets.

What Are ELNs?

Equity-linked notes (ELNs) are hybrid securities whose overall return is linked to the price performance of an underlying stock plus a coupon received. ELNs are issued by banks and designed to deliver an income stream for the portfolio plus a price return potential. Why invest in them?

Income generation: ELNs can generate compelling income, with attractive coupon rates. They create an income stream in exchange for capped upside of the stock. They still offer the potential for capital appreciation, up to the cap.

When a stock option is pricing in high volatility, ELNs can monetize this as current income, even if the stock does not appreciate.

Potential for lower downside participation: Coupon payments (interest income) from ELNs have the potential to buffer downside participation. If the price of the stock falls, the income produced by the ELN offsets all or part of the price depreciation.

Expanded investment universe: ELNs offer the possibility of generating income from stocks that pay low to no dividends, thus expanding the investable universe beyond traditional dividend-paying sectors.

ELNs Can Provide a Synthetic Income Stream

Many of today’s largest and fastest-growing companies, particularly in technology, prefer to reinvest cash flow into growth rather than return it to shareholders. ELNs allow investors to generate a synthetic income stream by capping the upside and monetizing the volatility of its share price. ELNs generate income from companies that would otherwise contribute nothing to a portfolio’s yield. ELNs convert price-return-only exposure into price and income-generating position, letting investors participate in high-growth sectors like technology without sacrificing the current income objective.

Fixed Income

The Appeal of Sovereign Bonds

In a global equity income strategy, sovereign bonds, both developed and emerging market, are often favored over corporate bonds to enhance diversification. Their prices are driven more by monetary policy, inflation and macro cycles than by the corporate earnings and credit cycle that also moves equities.

Developed market sovereigns have historically shown flight-to-quality behavior, rallying in risk-off periods when equities and corporate bonds sell off together. Emerging market sovereigns typically provide higher yields than developed market sovereigns, compensating investors for additional macro, currency and political risk while boosting overall portfolio income. They also introduce exposure to different economic growth cycles. Many EM economies grow faster than developed markets over the long run, and their monetary policy cycles often move independently of the US Federal Reserve or European Central Bank, adding a return driver that isn’t tightly correlated with developed market fixed income or equities.

Emerging market sovereign bonds offer meaningfully higher yield with similar volatility as developed market sovereigns—a more attractive yield-per-unit-of-risk. Corporates sit in between, with the lowest volatility of the group but also lower yield than emerging market sovereigns.

Note that these are point-in-time snapshots and that bond volatility can shift quickly. Emerging market sovereign risk referred to here reflects USD-denominated bonds only. Their local-currency equivalent carries meaningfully higher risk from currency exposure; hence, we prefer emerging market USD-denominated sovereign bonds. 

Diversification and Concentration Risk

Global equity markets are more concentrated today than they have been in decades—the 10 largest stocks now account for roughly a quarter of the MSCI All Country World Index. The technology sector has grown to a disproportionately large component (see below).

A multi-asset, multi-geography income approach buffers against concentration risk on several dimensions simultaneously.

Asset class concentration: Relying on equities alone ties income to corporate earnings and equity market performance. Adding government bonds introduces a performance driver tied to interest rate policy and sovereign credit, which often moves differently than corporate profitability. ELNs add a third dimension—structured payoffs that behave differently from either equity or fixed income. If one asset class faces a drawdown or an income disruption, the other sources aren’t necessarily affected in the same way.

Income source concentration: Perhaps most specific to this approach: even the type of income is diversified. Equity dividends depend on corporate discretion and profitability; bond coupons are largely contractual and depend on sovereign creditworthiness; ELN coupons depend on structuring terms and underlying performance. If one income source is cut or underperforms, the portfolio isn’t left with an income gap, the other streams continue independently.

Geographic and currency concentration: A portfolio anchored to a single country’s equities or bonds is exposed to that country’s economic and earnings growth cycle, monetary policy, currency and political risks all at once. Spreading across global markets means no single stock, central bank decision or currency move can dominate the outcome. A slowdown in one region can be offset by resilience in another.

Sector and issuer concentration: Domestic dividend-focused portfolios often cluster in a handful of sectors (financials, utilities, energy) that traditionally pay high dividends. Going global widens the pool of eligible income-payers across more sectors and more individual issuers, so no single company, industry or dividend policy change carries outsized influence over total portfolio income.

Global Income Risks

Global income strategies carry several risks, including the potential for underperformance during growth-led market rallies, as income-oriented portfolios typically have lower exposure to fast-growing sectors such as technology. Dividend payments are not guaranteed and may be reduced during periods of economic stress, while currency fluctuations, regional economic weakness and geopolitical events can affect returns from international holdings. Using ELNs to enhance income can introduce issuer credit risk and cap upside participation if the underlying stocks rise sharply. While investors may receive higher income, they may sacrifice some capital appreciation potential in if equity markets surge.

A Strong Combination

We believe the combination of income, diversification and reduced reliance on any single asset class or region makes a global multi-asset income a durable, versatile strategy for investors seeking both Income and long-term total return.