About 85% of advisor portfolios now include multi-asset class (MAC) funds, according to a recent kasina survey, with an average allocation of nearly 15%. MAC funds vary by purpose, including some designed for investment income. "We think the new generation of income-focused funds will eventually rank among the top three choices by MAC users," says Lawrence Petrone, director of research at kasina.

As the name suggests, MAC funds' holdings span a wider variety of asset classes than traditional equity or fixed income funds. "We have specialists following the underlying sectors," says Michael Schoenhaut, portfolio manager for the JPMorgan Income Builder Fund. "I use their information to put together the fund's overall asset allocation, trying to find the precise weighting to produce the best income yield per unit of risk, plus adequate diversification." Among the asset classes included in this particular income-oriented MAC fund are global equities, global REITs, convertibles, high yield bonds, and emerging markets debt.

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