A star performer in the Old Mutual Unit Trusts stable and managed by Macro Strategy Investments (MSI), the fund has delivered consistently exceptional performance for its investors.

To 31 August 2011 it has been a top-quartile performer in the Domestic Asset Allocation - Prudential Low-Equity category over periods of one, two, three and five years.

According to MSI boutique head and fund manager Peter Brooke, the fund aims to provide both a growing income and some level of capital appreciation. It actively seeks opportunities to protect the capital in the fund against inflation.

This results in the income being paid out on an ever-rising capital base.

Inflation protection is achieved by investing across the full spectrum of fixed-interest investments plus selective exposure to equities and listed property.

The fund's portfolio is limited to a combined exposure of 35% in listed property and equities, but can invest up to a maximum of 25% in either of these asset classes.

The fund conforms to the legislation governing retirement funds (Regulation 28), so is a suitable investment vehicle for retirement funds.

This is a moderately conservative risk fund - it has a higher volatility than traditional income funds, but a lower volatility than most asset allocation funds, due to the relatively lower equity content.

MSI manages risk through exposure to short and long term instruments, as well as through the use of hybrid instruments, such as convertible bonds.

It is particularly suited to investors that require an income stream while maintaining scope for inflation-beating growth on their capital.

The fund has also delivered on its objective of preserving capital over rolling 12-month periods with a 98.1% success rate, while offering moderate, market-related growth via an actively managed portfolio of cash, bonds, property and equity.

This is a great solution for clients who are facing the inflation challenge, as it combines the objective of income generation with capital growth in line with inflation.

With its return target of CPI+3%, the fund diversifies across asset classes, which enables it to offer interest income and capital protection via exposure to money markets and fixed-income investments; and protection against inflation through exposure to growth assets such as equity, property and inflation-linked bonds.

An added bonus is that its exposure to the right equities should add a tax-free dividend income sweetener to the income portion - for it is dividend income that helps us in our quest for yield.

Add to this the benefits of active asset allocation, which means that the portfolio manager, Brooke, can manage downside risk and exploit market opportunities by restructuring the portfolio's allocations as conditions change.

"The fund benefits from the unique insights of our diverse team of investment professionals and a disciplined investment process:' Brooke explains. "These insights inform the active asset allocation decisions that seek optimal investment exposure for investors at all times.

"And while I and the MSI team are responsible for stock-picking and asset allocation, the fixed income component of the fund is actively managed by Wikus Furstenberg, senior portfolio manager at Futuregrowth Asset Management, who has specialist skills when it comes to taking advantage of market opportunities using bonds, money market instruments and preference shares:'

As a result of this diverse exposure, Old Mutual Real Income Fund offers conservative investors an attractive alternative to pure income and money market investments.

After all, it offers respectable growth at reduced volatility, plus a steady income stream comprised of both interest and dividend income.