Asset classes

 

Defensive or aggressive?

Your super is invested across a wide range of different investments and asset classes. These are generally divided into two groups: growth assets and defensive assets. Within each group, there are a number of different types of asset classes.

 

Growth assets include shares, property and private equity, as well as some alternative assets. Growth assets primarily provide capital growth with some income in the form of dividends. Growth assets generally offer the greatest potential for long- term growth but the returns can go up and down with negative returns possible from time to time.

An investment in Australian shares provides part ownership of a company listed on the Australian Securities Exchange. Investment returns are derived from movement in share prices resulting from company or sector performance and from dividends, which are company profits distributed to shareholders. Shares can be held directly or through a trust. A trust generally pools money from a group of investors (for example, other super funds) and uses the money to purchase a range of shares.

International shares are shares in a company listed on the stock exchange of another country. In addition to the factors noted above in Australian shares, international shares can be affected by movements in the currency exchange rate. Changes in value in foreign currency may increase or decrease investment returns.

Investing in property usually involves investing in a property trust. Property trusts generally pool money from a group of investors and use the funds to buy a range of retail, commercial or industrial properties. They may be listed on the Australian Securities Exchange or unlisted.

Private equity is investment in a company or enterprise that is not listed on a stock exchange. These companies often have an established track record in their field of business and require new funding to finance expansion.

Infrastructure investments are the utilities and facilities that provide essential services and help drive economic growth. Examples of infrastructure assets include transportation assets (bridges, toll roads, airports and rail), utility and energy (water, electricity and gas), communications infrastructure (such as transmission towers) and social infrastructure (healthcare facilities and education).

Growth Alternatives cover a wide range of investments that do not readily fall into any other growth-oriented asset class. They are often unlisted and may be either liquid or illiquid.

Defensive assets include fixed interest and cash deposits as well as some alternative assets. Defensive assets often provide income with the repayment of capital on maturity. They offer less potential for long-term growth (compared to growth assets), but the returns are generally more stable.

Fixed interest investments (for example, Government bonds) provide a rate of interest for a specific period of time, although the return will vary if the investment is sold before the maturity date. These securities are affected mainly by the rise and fall of interest rates.

Cash enhanced assets include a wide range of money market and short-term fixed interest investments. Changes in the level of interest rates will affect returns.

Cash invests in a narrow range of short-term money market investments that aim to produce a return that closely matches the UBSA Bank Bill Index (less fees and taxes).

Defensive Alternatives cover a wide range of investments that do not readily fall into any other defensive focused asset class. They are often unlisted and may be either liquid or illiquid.

 

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