Asset classes

An asset is something that can be invested in with the objective of financial gain. 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.

 

Assets aiming for growth

Growth assets (sometimes known as return-seeking assets) are generally assets that aim to provide capital growth.

These type 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. For example:

  • Real Assets: A combination of Australian and international property and infrastructure assets either owned directly or indirectly through listed or unlisted trusts. Property may include commercial and retail land or buildings. Infrastructure may include airports, electricity generation and toll-roads. Other real assets may include agriculture, or timber or water rights. Investment returns can come from the change in valuation of the asset over time (either an increase or decrease), as well as net rental income that is earned.
  • Multi-Assets: Dynamically manages investments across a range of asset classes in response to changes in the respective investment managers’ investment market outlook. The mix of asset classes could include shares, fixed interest, high yield credit, listed infrastructure, absolute return strategies and cash. Returns can come from a range of sources, e.g. income returns and capital growth or loss from the mix of assets determined by the investment manager.
  • Shares: Relates to investment in companies listed in either Australian or international markets. Returns can come from capital growth or loss of the share, as well as any dividends paid to the shareholder from the company.
  • Alternatives: Various investment strategies that access alternative return drivers. These strategies typically have a strong emphasis on providing diversification, focus on niche markets, or are skill-based. Returns can come from a range of alternative return sources to the traditional asset classes (ie. insurance, momentum, carry and value); in addition to capital growth or loss and income returns from investing in microcap companies listed in Australia which have private-equity like characteristics.

 

Assets aiming for income (or to control risk)

Defensive (or income) assets are generally those that aim to provide income rather than capital growth.

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. For example:

  • Cash: Assets that relate to investments in bank bills, short-term deposits with financial institutions or corporate promissory notes. Returns come from interest payments received or any capital growth or loss if the asset is traded before maturity.
  • Fixed Interest: Investments that usually represent loans to government or corporate organisations. Returns come from interest payments, or any capital growth or loss if the asset is traded before maturity.