An asset is something that can be invested in with the objective of financial gain, and groups of similar assets are known as 'asset classes'. Different types of assets are generally associated with different levels of investment risk and the potential level of returns.
Growth assets are generally assets that aim for capital growth. These types of assets can often have the potential for higher investment returns over the longer term, but they also tend to have higher investment risk and likelihood of their value rising and falling, either a little or a lot, in the short term.
- 'Shares' relates to investment in companies listed in either Australian or international markets. Returns on shares come from the capital growth or loss in the value of the company, as well as from any dividends paid to shareholders. While longer term returns for shares are often higher than other asset classes, the also have higher risk and can rise and fall in value, and by larger amounts, over the shorter term.
- 'Alternatives' simply describes a range of investment strategies that have a different approach to traditional types of investments like shares, property, bonds etc. Typically, these alternative investments have a strong emphasis on providing diversification and capital growth opportunities within specialised and private markets. Alternatives assets have a medium to high level of investment risk, but can also deliver a higher level of returns over the longer term.
- 'Real Assets' includes investments in real or physical assets such as property and infrastructure, which is the utilities and facilities that provide essential services to the community. We invest directly and indirectly, through listed and unlisted trusts, in assets in Australia and internationally. Returns on these assets come from the change in capital value over time, as well as from income received from the asset, e.g. rental income. Property and infrastructure assets have a higher level of investment risk, but can also deliver higher returns over the longer term.
- 'Multi-Assets' is a strategy that aims to improve our potential to achieve investment objectives over the longer term. Investment managers can invest in a range of different assets, both capital growth-seeking and/or defensive, including shares, fixed interest, high yield credit, listed infrastructure, absolute return strategies, and cash. There's no pre-determined allocation to any particular type of asset. Although it may hold a mix of both growth and defensive assets, typically this asset class aims for growth over the longer term, and has an overall medium to high level of risk.
Defensive assets are generally those that aim to provide a steady and/or stable income stream. These assets generally have lower investment risk, with more stable returns in the short term, but also generally have the potential for lower returns over the longer term.
- Our 'Cash' portfolio investments are predominantly shorter-term investment deposits with a range of financial institutions and money market instruments including, but not limited to, short-term bank bills, treasury notes and certificates of deposit. These types of investments generally provide stable returns, but have lower return levels over the longer term. However, in the current low interest rate environment, low or negative returns on cash investments are likely includes investments in bank bills, short-term deposits with financial institutions or corporate promissory notes. Returns come from interest payments or any capital growth or loss if the asset is traded before maturity.
- Our 'Fixed Interest' portfolio investments are typically bonds, which are loans to government or corporate organisations in exchange for regular interest payments over an agreed timeframe. The bond amount is then repaid in cash when the loan matures. Fixed interest investments are usually less volatile than other types of investments, such as shares. Typically they have more consistent returns over shorter periods. However, in the current low interest rate environment, higher levels of risk and volatility of returns for these investments are likely.
For more information on asset classes, please see the Reference Guide: Investments.