Fund Spotlight: How to grow your wealth faster than the rising inflation?

• Persistent inflation strengthens the case for equity income. With inflationary pressures eroding purchasing power, equity income funds offer an alternative for investors seeking attractive distributions alongside long-term capital growth.
  
  
• Income without sacrificing growth exposure. Unlike traditional dividend-focused funds, the Allspring Global Enhanced Income Fund maintains sector and geographic allocations broadly aligned with the MSCI ACWI, including significant exposure to AI and technology leaders such as NVIDIA, Microsoft and Amazon.
  
  
• An options strategy supports the 6% annual distribution target. By selling call options on major equity indices, the fund collects premiums to supplement dividends, particularly benefiting from sideways or moderately rising markets.
  
  
• Competitive total returns alongside regular income. The fund has outperformed the MSCI ACWI and global equity peers over the past one, three and five years.
  
  
• The fund's focus on fundamentally strong companies with above-average dividend yields, complemented by premiums from its options strategy, can help cushion losses during market downturns. This has contributed to a slightly lower five-year maximum drawdown than the MSCI ACWI and global equity peers.

Inflation is making a comeback, and investors are feeling the squeeze. In the US, core PCE inflation reached 3.0% year-on-year (YoY) in August, while Eurozone core inflation stood at 2.5% in September. Closer to home, Singapore's core inflation climbed to 2.2% YoY in August. With elevated energy prices, persistent Middle East tensions and booming AI infrastructure investment adding to price pressures, inflation is proving harder to tame than many had anticipated.

Historically, equities have demonstrated a strong ability to outpace inflation over the long term. Over the past decade, the MSCI World Index delivered an annualised return of 13.4% in USD terms, exceeding annual global inflation, which ranged from 1.6% in 2016 to a peak of 8.1% in 2022. This highlights how staying invested in equities over the long term can help investors grow their wealth and preserve purchasing power, despite periodic market fluctuations.

In today's volatile environment, equity income strategies offer an additional advantage. From shifting interest-rate expectations and geopolitical headlines to concerns over AI valuations, investors have plenty of reasons to expect further market swings. For those relying on their portfolios to fund everyday expenses, selling investments during a market correction is hardly ideal. A steady stream of cash distributions can help reduce that pressure, allowing investors to meet their income needs while staying invested for a potential recovery.

More importantly, the earnings backdrop remains supportive of dividend growth. Corporate dividends have the potential to increase alongside earnings, providing investors with a growing income stream over time. The AI investment boom continues to fuel strong profit growth in technology and semiconductors, with benefits increasingly spreading to industrials and other sectors. For investors, this creates an opportunity to enjoy regular income while participating in the companies driving global earnings growth.

We believe the sweet spot lies in strategies that offer both income and growth, rather than simply chasing the highest dividend yields. After all, a generous payout means little if it comes at the expense of long-term capital value. In our view, one strategy worth exploring is the Allspring Global Equity Enhanced Income Fund.

Allspring Global Equity Enhanced Income Fund: Balancing income with growth

The Allspring Global Equity Enhanced Income A Dis USD targets an annual distribution rate of 6%, while seeking long-term capital appreciation.

Traditional equity income strategies often significantly overweight high-dividend sectors such as utilities and financials, or higher-yielding markets such as Brazil and Australia. While these provide relatively stable income, they can limit exposure to growth themes.

Allspring takes a different approach, maintaining geographic, sector and factor exposures broadly aligned with the MSCI All Country World Index (ACWI), while targeting a beta of approximately one. To support its 6% p.a. distribution target without sacrificing growth exposure, the fund combines two complementary income sources.

The first is a is a portfolio anchored by dividend-paying equities. The fund typically holds 60 to 80 stocks selected for attractive valuations, quality fundamentals and above-average dividend potential. At least 90% of the equity portfolio is invested in dividend-paying companies, while up to 10% can be allocated to non-dividend-paying growth companies. This flexibility allows the managers to capture opportunities that more restrictive income strategies might otherwise miss.

The second is an actively managed options overlay. By selling call options on major equity indices, the fund earns option premiums that supplement the dividends received from its underlying holdings. The managers can adjust the options exposure depending on market conditions and the income required to support the distribution target.

Together, these two components help address a common challenge faced by equity income investors: how to generate attractive distributions without concentrating excessively in slower-growing, high-dividend sectors.

Portfolio breakdown: Technology remains a key growth driver

Geographically, the US remains the fund's largest exposure at approximately 60% of assets, although this is around four percentage points below the MSCI ACWI benchmark. This modest underweight reduces the fund's reliance on relatively expensive US equities while allowing greater exposure to dividend opportunities elsewhere.

The fund's largest active overweight is Brazil, where its 3.6% allocation compares with just 0.5% in the benchmark. Brazil's relatively high-dividend equity market provides an additional source of natural portfolio income. The Netherlands, France and China are among the other notable overweights, reflecting the managers' preference for selected opportunities outside the US.

Figure 1: The fund underweights the US, overweights selected Europe and emerging markets

The sector allocation reveals an even more important distinction. Technology remains the fund's largest sector exposure at 32.8%, broadly in line with the global equity benchmark. This allows Allspring to continue to participate in the AI investment cycle that have supported global earnings.

At the same time, financials represent the fund's largest sector overweight, at nearly three percentage points above the benchmark. Banks and insurers generally offer attractive dividends, while selected financial institutions can benefit from higher interest rates through stronger investment income and more resilient net interest margins. A modest overweight in energy also provides some exposure to companies benefiting from elevated oil prices, which is particularly relevant given this year's Middle East energy shock.

This combination gives the fund exposure to both sides of the market: growth through technology and income through financials, energy and other dividend-paying businesses.

Figure 2: Technology remains the largest sector exposure, complemented by modest overweights in financials and energy

The fund's top holdings reinforce this balanced approach. Its portfolio includes many of the technology leaders driving global earnings growth. NVIDIA, Apple, Alphabet, Microsoft, TSMC and Samsung Electronics (Table 2) provide exposure to AI infrastructure, advanced semiconductors, cloud computing and digital platforms. Amazon is particularly interesting. As a non-dividend-paying company, it would generally be excluded from a traditional dividend-focused portfolio. Allspring's flexible mandate allows it to participate in Amazon's growth through its allocation to non-dividend-paying companies.

Alongside these technology leaders are more established businesses with resilient earnings and long-term growth opportunities. Coca-Cola, for example, has increased its dividend annually for more than six decades, providing a dependable income component. Eli Lilly offers exposure to the expanding market for obesity and diabetes treatments, while Japan's Recruit Holdings provides participation in the growing adoption of digital recruitment and HR technology.

Table 2: Top 10 holdings of the fund

Holdings	Country	Sector	Fund Weights	MSCI ACWI Weights	Difference
NVIDIA Corporation	US	Information technology	5.0%	5.1%	-0.1%
Apple Inc	US	Information technology	4.6%	4.8%	-0.1%
Alphabet Inc. Class A	US	Communication Services	3.4%	2.0%	1.4%
Microsoft Corporation	US	Information technology	3.3%	3.5%	-0.2%
Taiwan Semiconductor Manufacturing Co., Ltd. ADR	Taiwan	Information technology	2.8%	1.9%	0.9%
Coca-Cola Company	US	Consumer Staples	2.1%		2.1%
Amazon.com, Inc	US	Consumer Discretionary	2.1%	2.4%	-0.3%
Samsung Electronics Co., Ltd	South Korea	Information technology	1.9%		1.9%
Eli Lilly and Company	US	Healthcare	1.7%		1.7%
Recruit Holdings Co., Ltd	Japan	Industrials	1.6%		1.6%
Source: Allspring. iFAST compilations. Data as of 30 Sept 2026.

Unlocking 6% income through options

If the fund maintains substantial exposure to technology and growth stocks, how does it achieve its 6% annual distribution target when many of its largest holdings pay relatively low dividends?

The answer lies in its options strategy. By selling call options on major equity indices, the fund collects premiums to supplement dividend income. Allspring uses index options, allowing it to retain the potential to outperform the broader market through stock selection.

For example, the fund held S&P 500 call options with strike prices ranging from approximately 7,925 to 8,225 (Table 3), above the index's trading range during August and September. As long as the index remained below these strikes at expiration, the fund could retain the premiums without sacrificing equity upside. Conversely, a rally above the strikes would generate option losses that partially offset portfolio gains.

The S&P 500's relatively range-bound performance in 3Q2026 illustrates the strategy's appeal. With limited upside pressure on its call options, the fund was able to collect premiums while retaining equity exposure. This helped it deliver a 1.09% return for the quarter, outperforming the benchmark's 0.34% gain in SGD terms.

Importantly, the fund spreads its options across multiple strike prices, allowing upside exposure to be reduced gradually rather than at a single level. It also uses short-dated options, typically rolling positions monthly or more frequently, to adjust exposures as market conditions evolve.

Table 3: Examples of the options

Options contracts	Index
C/O CBOE S P 500 C SEP 7925.00	S&P 500
C/O CBOE S P 500 C SEP 8025.00	S&P 500
C/O CBOE S P 500 C SEP 8225.00	S&P 500
C/O EUREX EURO STOX SEP26 6700	Euro Stoxx 50
C/O MSCI EAFE INDE SEP 3375.00	MSCI EAFE Index
C/O MSCI EMERGING SEP 1810.00	MSCI Emerging Market Index
C/O NIKKEI 225 SEP26 74750	Nikkei 225
Source: Allspring. iFAST compilations. Data as of 31 August 2026.

Performance: A strong track record of total returns

An attractive distribution rate is only part of the equation. For an equity income strategy to create lasting value, it must also preserve capital and deliver competitive total returns.

On this front, the fund has demonstrated a strong track record. It has outperformed the MSCI ACWI, the broader global equity fund peer group and global equity income fund peers over the past one, three and five years on a total-return basis.

Figure 3: The fund outperformed benchmark and peers across past five years

Looking at calendar-year returns, the fund outperformed the MSCI ACWI in four of the past five years, with 2023 being the exception. That year provides a useful illustration of the strategy's trade-off. The MSCI ACWI gained approximately 21%, supported by a narrow rally in US mega-cap technology stocks. During such strong, momentum-driven markets, selling call options can become a disadvantage, as the premiums collected may be outweighed by the upside surrendered.

Figure 4: The fund only underperformed the benchmark in one out of 5 years

Another important consideration is downside resilience. During the 2022 equity bear market, Allspring declined approximately one percentage point less than the MSCI ACWI and 2.5 percentage points less than global equity fund peers. Its five-year maximum drawdown was also lower than both, reflecting the cushioning effect of option premiums during market downturns (Figure 5).

However, with a beta close to one, the fund remains exposed to broad equity-market volatility. While it has shown better downside resilience than the MSCI ACWI and global equity peers, more defensive income funds with greater exposure to financials, industrials, healthcare and utilities have generally provided stronger protection. Consequently, Allspring's five-year maximum drawdown remains larger than those of its global income peers, reflecting the trade-off between capturing growth opportunities and managing downside risk.

Figure 5: The fund has managed the downside better than global funds and benchmark but lagged income peers

Why consider Allspring ‘s Enhance Income in today’s inflationary environment?

 For investors comfortable with equity-market volatility, particularly those seeking exposure to structural growth themes such as technology, semiconductors and AI, the challenge is finding a strategy that generates regular income without sacrificing long-term growth potential. The Allspring Global Equity Enhanced Income Fund offers a well-tested way to combine the two:

1.      A clear, regular income. A 6% p.a. target paid monthly, about three times what SGD 1- and 2-year bonds and fixed deposits currently offer, with payouts that have grown alongside the NAV. Its annualised distribution rate has remained around 6% over the past year, demonstrating the strategy's ability to support relatively consistent cash payouts (Figure 6).

Figure 6: The fund’s dividend per share is growing

2.      Growth is not sacrificed for yield. Near-index weights in technology and holdings such as NVIDIA, Microsoft and Amazon keep the fund exposed to the structural themes driving global earnings.

3.      A smoother ride. Option premiums can help cushion equity losses during market corrections while generating additional income in sideways markets. Regular distributions also allow investors to meet their spending needs without selling holdings at unfavourable prices, making it easier to stay invested through volatility. This benefit was evident during the March market turmoil, when the fund held up better than its benchmark.

We believe the fund may appeal particularly to investors who want an income-generating global equity allocation without giving up substantial growth exposure. Ultimately, the fund's appeal is not simply its 6% p.a. distribution target. It is the potential to combine regular income, global diversification and long-term equity growth within a single strategy.

Declaration:

This research report was prepared with the assistance of artificial intelligence (AI) tools. iFAST Financial Pte Ltd does not rely exclusively on AI for content generation; the content of this report – including all investment theses, ratings, price targets and conclusions – has been independently reviewed and verified by the research analyst(s) to ensure accuracy and professional integrity.

For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) and the analyst who produced this report hold a NIL position in the abovementioned securities.