Why property-backed fixed income is a stabiliser in a soaring market

Investors recently watched the FTSE 100 reach new heights as it broke through the 9,000 mark for the first time. For context, it took eight years to climb from 7,000 to 8,000, but only two years to rise from 8,000 to 9,000 highlighting just how quickly market momentum can shift. It’s a reminder of the remarkable pace of change in today’s investment landscape.

But these heady figures only tell one side of the story. Soaring equities can also come with risks. Such records may be welcome news for those already invested but are share prices being driven more by sentiment than fundamentals? Additionally, such highs can be short-lived: on the same day it broke through 9,000, the FTSE 100 retreated. Major indices are easily influenced, and investor concerns can cause rapid selloffs and increased volatility.

The case for diversification

Being exposed to a major equity index at a time of record highs can be rewarding. But concentration in any single asset class, equities included, can increase exposure to downside risk. This is a timely reminder of the value of diversification, particularly in the event of a market correction.

Blending asset classes is a key diversification strategy, as they often behave differently in response to market conditions. Property-backed fixed income is often used to introduce balance to equity-heavy portfolios. It offers steady returns that are uncorrelated with the stock market.

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“There’s something reassuring about having a diversified investment portfolio that includes something backed by property and delivering a fixed monthly income,” says Roy Warren, managing director of Folk2Folk. “It’s a different rhythm to the stock market, but one that’s resonating right now.”

Fixed income may not soar like equities, but it also tends to be less volatile. Its appeal lies in its predictability; generating steady, recurring income that helps investors lock in returns and manage overall portfolio risk. Of course, property markets can fluctuate too, and secured lending carries its own risks. But the combination of a tangible asset and fixed payment structure typically offers more stability than equities.

The Folk2Folk approach

No investment is without risk and fixed income investors can still experience losses. At Folk2Folk loans are secured against property, typically at a maximum 60 per cent LTV, providing a layer of protection. If a borrower cannot repay, there’s a tangible asset to support recovery, though full repayment isn’t guaranteed, particularly if property values fall.

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While this doesn’t eliminate risk entirely, it adds a layer of protection not found in many other investment types.

“We continue to see strong demand from investors seeking steady income while their capital is secured against tangible assets,” adds Warren. “There’s a definite shift toward recurring income, and that’s exactly what we provide.”

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With potential Bank of England rate cuts ahead it’s a relevant time to consider portfolio resilience. Against this backdrop, property-backed loans with attractive income yields could become even more compelling.

Sponsored content created in partnership with Folk2Folk.