- Australian equity
- international equity
- long/short equity funds
- real assets such as unlisted property
- fixed interest
Investing in Australian equity means investing in the ownership of Australian companies; return on investment from this asset class comes from company profits in the form of dividends and share price fluctuations. Returns can be very volatile and are considered high risk in the short term but may offer higher returns over the longer term.
Investing in international equity means investing in the ownership of companies based overseas; return on investment from this asset class comes from company profits in the form of dividends and share price fluctuations. Foreign currency movements may also affect investment returns. In comparison to investing in Australian equity, international equity can offer a much broader range of companies and opportunities to invest in, but which are also exposed to different investment risks. Returns can be very volatile and are considered high risk in the short term but may offer higher returns over the longer term.
Long/short equity funds
Investing in long/short equity is similar to investing in international equity with the exception that investment managers in this asset class can sell as well as buy companies.
Real assets such as unlisted property
Investing in real assets involves investing in established buildings and properties; these are either in the retail, office or industrial sector. Investing in this asset class can also involve investing in property trusts and property companies, in which PSSap funds are pooled with funds from other investors to purchase large properties. Property returns come from rent and property values fluctuations over time. Property generally has lower returns than, for example, Australian equity, and involves a moderate level of investment risk.
Investing in alternatives involves using typically active strategies across various financial markets and securities. Returns from this asset class generally have a lower correlation with returns from equity markets. In this way, these strategies can provide diversification benefits to investments in equities but can be more reliant on the skill level of the fund managers implementing the strategies. Depending on their strategy and speciality, an alternatives manager can invest globally in many different types of financial securities, such as equities, fixed income, foreign exchange, derivatives and commodities.
Investing in fixed income involves lending money to governments and companies through the purchase of bonds (bonds take a variety of forms). Generally the face value of the bond will be repaid on a set date and a fixed rate of interest is paid during the term.
Over the longer term, fixed income investments generally offer a higher rate of return than cash for a moderately higher risk.
Funds in this asset class are invested in the Australian money market in investments such as term deposits and securities.