Understanding AvSuper’s asset classes
Individual investments get classified into asset classes or sectors. Combined, these asset classes make up the investment options and portfolio of the AvSuper Fund. When investing, different asset classes can impact on your overall investment performance. Some studies have even indicated that up to 90% of differences in returns between investment portfolios can depend on adequately diversified asset allocations more than the actual asset performance.
An asset class is a category of investments that exhibit similar characteristics in the market place. Within each asset class the investments should have similar risk and return profiles and similar laws and regulations performing in a similar manner to each other. Understanding what to expect from each asset class helps AvSuper and more importantly, helps you to make the right investment decisions.
The following table is a brief outline of the major asset classes AvSuper uses to diversify investments.
|Cash||Bank and term deposits||Cash is a stable investment that provides steady returns. While the chance of losing money is remote, the returns tend to be low.|
|Fixed Interest||Securities such as bonds and debentures||Over the long-term, fixed interest tends to provide better returns than cash, but lower returns than real assets and shares.|
|Real assets||Includes property (retail, commercial or industrial real estate) and infrastructure (Investments in utilities and facilities that provide essential services such as roads, airports, gas, electricity and hospitals)||Over the long-term, property and infrastructure tend to earn more than fixed interest or cash, and usually have low price volatility and steady investment returns but generally earn less than shares.|
|Private markets||Private* market investments which invest in private companies assets and pooled investments, using unique strategies to gain returns||Over the long term, private markets can earn significantly higher returns than other sectors, however, they also carry a higher level of risk.|
|Alternative investments||Hedge Funds, credit managers and unique opportunity investments which can use pooled investments, derivatives and other different strategies to gain extra returns||Over the long-term, alternative investments tend to earn more than property, fixed interest or cash, but fluctuate in value more in the short term, so they carry a medium to high level of risk.|
|Shares||Units of ownership in companies listed on a public share markets (such as the Australian Stock Exchange)||Shares tend to earn the highest returns over the long term, but are more likely to fluctuate in the short term which makes shares a high risk investment.|
*Private refers to not being listed on a stock exchange.
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