Can equity investors balance income today with growth tomorrow?

Equity investors often face a difficult trade-off. Income strategies can provide regular cash flows but often miss long-term earnings growth and can still fall sharply in weak markets. By contrast, growth strategies have historically delivered strong capital growth but usually offer less income and greater volatility.

Relying on only one of these approaches can leave portfolios vulnerable to regime risk – long periods when that style falls behind as market drivers change (see Exhibit 1). This reflects the reality that the styles that outperform have shifted over time across value, income and growth, depending on the market environment.

The income-growth barbell may offer a clearer framework. It combines an income-focused equity allocation with a growth allocation to create a more balanced approach across market cycles. The aim is not to remove equity risk, but to potentially improve outcomes and maintain exposure to long-term growth trends, ranging from artificial intelligence to the energy transition, while maintaining an income advantage over global equities.

Historically, this balanced structure has delivered returns more efficiently and helped avoid the weak periods associated with relying on a single style. In an environment marked by macro uncertainty and frequent regime shifts, the barbell can offer a disciplined framework for investors seeking income today without sacrificing growth tomorrow.

The barbell approach intentionally combines two complementary sources of equity return – and this is reflected in the type of companies the barbell approach seeks exposure to (see Exhibit 2):

• Income and resilience, derived from dividend-paying companies with established business models and cash-flow generation.
• Structural growth, captured through global technology leaders supported by long-term trends such as digitalisation, innovation and productivity gains.

By balancing these two drivers, the approach reduces reliance on any one market backdrop and aims to deliver steadier results over time.

Method: building a model barbell portfolio
To show how the barbell works in practice, we built a model portfolio with two-thirds income and resilience (MSCI World High Dividend Yield, net total return) and one-third structural growth (MSCI ACWI Information Technology, net total return). We rebalanced it daily, with results based on total-return indices.

The portfolio is intentionally simple, so investors can see clearly where returns and risks come from.

Even with only one-third allocated to technology, the income-growth barbell delivers competitive long-term returns relative to other equity strategies (see Exhibit 3). The growth sleeve helps offset the lower growth profile of income-focused equities, while the income sleeve helps anchor volatility.

Importantly, the barbell keeps volatility broadly in line with MSCI World, leading to a meaningful improvement in risk-adjusted returns over the long term. The results show that income alone does not necessarily reduce risk, while growth alone tends to be more volatile. Historically, the combination has been more robust.

In summary, income strategies in isolation often sacrifice growth without materially reducing risk. Growth strategies deliver strong returns, but with higher volatility and limited income (see Exhibit 5). The barbell structure combines both, resulting in equity-like returns with improved efficiency.

Looking only at full-period performance can hide how a strategy behaves in different market environments. Rolling analysis – measuring annualised performance over overlapping periods rather than in one fixed timeframe – answers a more useful question for long-term investors: did the strategy deliver attractive risk-adjusted returns consistently over time?

Using strict rolling calendar-year windows, the results show clear differences between equity styles in both the level and consistency of risk-adjusted returns:

• Pure technology delivers the highest average rolling Sharpe ratios (risk-adjusted return) over both five-year and 10-year horizons. Its Sharpe ratio exceeds that of MSCI World in almost all rolling periods, showing the strength of long-term growth compounding on a risk-adjusted basis.
• By contrast, high-dividend equities exhibit lower average Sharpe ratios than MSCI World and outperform in only a limited share of rolling windows, especially over longer horizons. This suggests income alone has not been enough to produce competitive risk-adjusted returns across full market cycles.
• The barbell strategy (two-thirds high dividend, one-third technology) combines the return strength of technology with the diversification benefits of income-oriented equities. As a result, it has delivered higher average rolling Sharpe ratios than MSCI World over both fiveyear and 10-year periods, outperforming on a Sharpe basis in almost all rolling periods.

Overall, the calendar-based rolling analysis supports the barbell as a structurally robust equity allocation, offering a more consistent and repeatable improvement in riskadjusted returns than single-style exposures across market cycles (see Exhibit 4).

Finally, the barbell can also deliver on a key goal for many investors: regular income (see Exhibit 5).

It is designed to provide a visible, recurring income stream while maintaining exposure to long-term growth drivers.

The income-growth barbell provides a simple, transparent and evidence-based equity solution for investors seeking income today and growth tomorrow.

The barbell’s strength lies not in forecasting style rotations, but in recognising that they will happen. Instead of trying to time cycles, the strategy builds diversification across equity styles into the portfolio itself. The income sleeve provides a steady yield and can support returns when markets reward valuation discipline and cash generation. The growth sleeve maintains exposure to long-term structural trends that have historically driven a disproportionate share of global equity returns.

We think the balance of the two is particularly relevant in current markets. Excessive reliance on long-duration growth assets may not be rewarded in an environment of higher inflation uncertainty, tighter monetary conditions and increased geopolitical risk. Even so, long-term challenges such as digital transformation, automation and innovation remain powerful drivers of corporate profitability. The income-growth barbell may offer a bridge between the potential risks and rewards by offering a more resilient equity allocation that is less vulnerable to abrupt style reversals.

Ultimately, this kind of allocation can be an efficient way to combine income generation with long-term capital growth – without sacrificing transparency or style discipline.