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Income funds draw record inflows as clients seek higher yields
State Street data shows $352 billion flowed into bond funds through July, while dividend funds added nearly $20 billion in the first half of the year.
Income investing is surging as climbing interest rates boost demand for yield, with investors and advisors increasingly channeling money into income-focused funds, according to Yahoo Finance. State Street data cited in the article shows bond funds are on track for their best year on record, drawing $352 billion in inflows through July. The article also points to dividend funds bringing in nearly $20 billion in assets in the first half of the year, which would be on pace for the highest level since 2022, and derivative income funds attracting more than $32 billion over the same period. Morningstar data cited by Yahoo Finance suggests the category is set for another record year as advisors offer more income-generating products beyond traditional bond exposure. The article notes advisors can help build diversified income strategies using tools such as private credit, covered calls, and other income-oriented approaches. While the focus is on yield, the article highlights a caution that yield alone may not be a sustainable distribution rate for long retirements, particularly when inflation is considered. Advisors quoted in the piece also describe demand from retirees who need current income, as well as investors seeking alternatives as US equities face a wall of worry, even as markets climb.