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Understanding asset classesÌýÌý

Asset classes are groups of investments that have similar characteristics. They are the building blocks of our investment options.

Diversification

Spreading your super across different types of assets is called diversification. Diversification can help reduce the amount of money you could lose if one investment or asset class performs poorly. This is because not all investments and asset classes perform in the same way at the same time. For example, when shares are performing poorly, bonds may be performing well, so a portfolio that holds both should produce a more stable overall return.

All our diversified investment options are invested across a range of asset classes.

We also offer single asset class options. You can select one single asset class option or choose a combination of these to diversify your investments.

Asset class types

Before choosing an investment option, it’s important to understand how risky it is. One way to assess this is to consider how much an option holds in growth assets and defensive assets.

The table below shows the growth/defensive classification of each of our asset classes.

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Liquid and illiquid investments

We invest in both liquid and illiquid assets.Ìý

• Liquid investments can be easily sold and converted into cash. They include shares, fixed income investments such as bonds, listed property and liquid alternatives.
  
• Illiquid investmentsÌýare those that can’t be converted into cash for a fair market value quickly or easily. They include unlisted property, unlisted infrastructure and private equity. These are often long-term investments which can match well with the long-term investment horizon of super. They can also help increase diversification.Ìý
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Our Core and Socially Conscious diversified investment options invest in a mix of liquid and illiquid investments.Ìý

Our Indexed and Single Asset Class options invest only in liquid investments.Ìý

Our asset classes

Here we describe each of our asset classes to help you understand how your super is invested.

Shares

Shares are investments that give you partial ownership of a company. They can be bought or sold on an exchange.

The value of shares depends on the performance of the company and the overall share market. Investing in shares offers the potential for high returns. However, share prices can change quickly and by large amounts. This makes them a high-risk investment.

We invest in both Australian and international shares across a range of industries.

Note our Australian and International shares asset classes may include small allocations to unlisted companies.

Private equity

Private equity is an investment in a private company, i.e. one that isn’t listed on a public stock exchange. It can include Australian and international companies across a wide range of industries.

Private equity investments can generate strong returns for investors. However, they are generally not easily traded and are high risk, so are best suited to investors with a medium to long-term horizon.

See examples of our private equity investments

Infrastructure

Infrastructure is the systems and facilities that provide essential services to communities. We can invest in these assets and also the entities that own and operate them.

Infrastructure investments can include:Ìý

• utilities, such as electricity, gas and water
• energy, such as power, renewables and storage
• transport, such as toll roads, railways, airports and seaports
• social infrastructure, such as hospitals and convention centres
• digital, such as fibre and data centres
• registries, such as land and motor vehicle registries
• infrastructure-like agriculture, such as water and timber assets
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Typically, our infrastructure portfolio will be fully invested in unlisted infrastructure assets. We may also hold a small amount of listed infrastructure assets from time to time.

See examples of our infrastructure investments

PropertyÌýÌý

Unlisted property assets include office buildings, industrial estates, shopping centres and residential property, as well as investments in property operating platforms which are property businesses that own and operate property assets in different sectors.

The property asset class within our Core and Socially Conscious investment options is mostly invested in unlisted property, though may include a small listed property holding.

Listed property investments are property owning entities and property businesses listed on a share market. The returns from listed property investments are closely tied to the overall real estate market. However, their value can also be impacted by general share market sentiment. As a result, their prices can change quickly and by large amounts, meaning they are generally higher risk than unlisted property.

See examples of our property investments
See examples of our investments in essential worker housing

Liquid alternatives

Examples of liquid alternative assets include hedge funds and real return strategies. These strategies have a wide range of allowable investments and can use a combination of shares, bonds, currencies, commodities and other liquid investments. They can make investments in these asset classes directly or through the use of derivatives. Liquid alternatives may be designed to provide diversifying sources of return and help manage portfolio risk, and can generally be readily converted into cash.

We invest in both growth-orientated and defensive liquid alternatives strategies.

• Growth-oriented strategies aim to generate returns above cash but with less risk (or volatility) than shares.
• Defensive strategies are designed to provide positive returns when share markets are falling.

Fixed incomeÌý

Fixed income investments pay regular interest over a set term, usually at a fixed rate. They can include bonds and securitised assets.

• A bond is a loan to a government or large corporation. The investor receives regular interest payments called coupons. The loan amount, known as the principal, is repaid to the investor when the loan period ends.
• Securitised assets are created by bundling together debts, for example residential home loans, into tradeable securities. Investors in these securities receive regular payments similar to bond interest payments.

Fixed income investments are defensive as most of their return tends to come from income rather than capital growth. While this means returns are typically more stable, it does not mean they will always be positive.

Their value tends to move in the opposite direction to interest rates. In other words, when interest rates rise the value of fixed income securities tends to fall, and when interest rates fall their value will typically rise. Other changes that can affect their value include:

• the circumstances of the individual lender
• economic conditions, and
• liquidity (how many buyers and sellers there are).

Credit income

Credit income covers a range of debt investments. Like fixed income, credit income investments involve lending money to a borrower. However, compared to fixed income, borrowers usually have a higher credit risk profile. This means the potential returns are typically higher than traditional fixed income though the risk of default is also greater.

Credit income invests in loans and bonds to borrowers across a variety of industries such as:

• infrastructureÌý
• real estate
• financials, andÌý
• different corporate sectors.Ìý
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CashÌý

Cash includes term deposits and other short-term interest-bearing investments issued by banks.

The cash allocation within our diversified options can also include other short to medium-term money market and debt securities. These types of cash investments have a higher risk than traditional cash assets, but also the potential for higher returns.

Cash typically provides a low risk, short-term investment with fairly stable returns compared to other asset classes. However, expected returns are also lower and may not keep up with inflation.

For more information on our asset classes, refer to the relevantÌýProduct Disclosure Statement or Handbook.

Related Information

• What we invest in
• Your investment options
• Investment managers
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Related documents

• Future Saver: Investment and Fees Handbook
• Retirement Income and Retirement Transition: Retirement Income Product Disclosure StatementÌý