Traditional income-generating strategies of the past, such as dividend stocks and bonds, faced challenges during the pandemic. For instance, ten-year treasury bonds plunged to their lowest in 234 years.  As a result, investors had to look for new ways of generating income as the COVID-19 pandemic ravaged conventional income-generating strategies. One way investors diversified is by turning into a new class of securities to boost portfolio income.

Investors sought pass-through securities, which are said to have an advantage over conventional income-generating stocks since they don’t pay corporation tax. Therefore pass-through securities have to distribute virtually all of their income to shareholders. 

Business Development Companies 

Among the ways investors diversified is through business development companies that lend money to SMEs. At the height of the pandemic, there was concern in the economy regarding small and medium-sized businesses’ survival. As a result, the business development company sector was impacted negatively by the pandemic and suffered massive losses. But with news of vaccines, there was a positive sentiment overtaking the industry. 

REITS

Another alternative investment area is the real estate investment trusts (REITs) which comprise real or physical property owners. Sometimes they can own mortgages associated with those properties. In 2020 the real estate sector, primarily commercial real estate, had challenges as people worked from home. REITs suffered across the board because of more so those exposed to commercial real estate like shopping malls or office buildings. However, in late 2020, as vaccinations started, the REIT market started to recover. 

Master Limited Partnerships 

The third alternative is master limited partnerships which are energy infrastructure assets owning natural gas and oil pipelines. Last year, MLPs also faced difficult times, mainly due to the collapse of oil prices, which went negative for some time. This was among the significant assets impacted by the pandemic as the world came to a standstill. Interestingly oil prices have recovered, and MLP prices have equally bounced back on the back of the recovery. It is not only oil prices that have recovered but broader commodity prices.