Asset classes explained

LGIAsuper’s investment options each invest in one or more asset classes, which can be described as either return-seeking or risk-controlling.

  • Return-seeking
    These assets generally achieve higher investment returns than risk-controlling assets over long periods, but have a greater chance of negative returns over short periods. Shares and property are examples of return-seeking assets.
  • Risk-controlling
    These assets are lower risk by nature, which generally leads to lower long-term returns than return-seeking assets. Cash and fixed interest are examples of risk-controlling assets.

Return-seeking assets

Click on any of the asset classes below to learn more about them.

Shares

Shares represent part ownership in a company and are also known as stocks or equities. People who buy shares in a company (shareholders) may be entitled to a portion of that company’s profits in the form of dividends.

Companies can reinvest profits or issue shares to raise money. Over time a company’s profits are expected to grow and increase the value of shareholders’ investments through higher share prices.

Share prices fluctuate, often dramatically, as investors collectively predict what they think the company could earn in the future compared to other investments. Investors use these predictions when making buying and selling decisions.

Australian shares are listed on the Australian Stock Exchange (ASX) while international shares are held for companies listed on stock exchanges overseas. Currency fluctuations can have a big impact on returns from international shares. This currency risk can be reduced or removed through hedging the currency exposure.

Over long-term periods, history shows shares have provided higher returns than property, fixed interest or cash.

See LGIAsuper’s top share holdings.

Property

Property investments can include office buildings, industrial sites and retail shopping centres in Australia and abroad. They provide regular income in two ways – through rent or increases in the value of the property itself.

Property can be purchased directly, or indirectly, through units or shares in a pool such as a property trust listed on the sharemarket (a listed property trust or LPT) or an unlisted trust.

Property investments can provide consistent income streams and strong capital growth if there is low gearing and low vacancy rates. While property traditionally provides higher returns than risk-controlling assets like cash or fixed interest, its value may change suddenly.

See LGIAsuper’s top property holdings.

Infrastructure assets

These are large-scale physical assets that provide essential services or products to communities and economies here and around the globe. Typically, infrastructure investments have long lifespans and no viable competitors due to either government regulations or the expense involved in duplicating them. Roads, bridges, ports, car parks, power stations and water treatment plants are just some of the many different types of infrastructure assets LGIAsuper invests in.

Infrastructure assets are less exposed to the volatility and risks associated with sharemarkets and tend to provide more stable investment returns, protection from inflation and reliable long term cash-flow streams.

Learn more about LGIAsuper's infrastructure portfolio.

Other

Other investments are considered non-traditional investments. They use complex market trading strategies that aim to generate returns that do not follow the cycles found in sharemarkets and other traditional investments. Hedge funds are possibly the more well-known type of investments in this category. Some other examples include hybrid financing instruments such as mezzanine debt (a mix of debt and equity financing used to financially back the expansion of existing companies) and convertible debt (a loan that can be converted to shares in the issuing company or cash).

See LGIAsuper's top other investment holdings.

Commodities

Commodities are natural resources or raw materials that are either grown or extracted from the ground and play a vital role in the production of other goods or services. They include precious metals, agricultural natural resources, energy and livestock.

Risk-controlling assets

Click on any of the asset classes below to learn more about them.

Fixed interest

Also known as bonds, fixed interest investments are loans over various periods to borrowers such as governments, companies and other entities. They do not include term deposits.

They offer a promise to return the money originally invested at a particular maturity date. They also promise periodic payments of interest, which may be fixed or directly linked to inflation or short-term interest rates.

Fixed interest returns are more variable than cash.

See LGIAsuper’s top fixed interest investments.

Cash

Cash and short-term securities or deposits are traded on the short-term money market.

Cash is the lowest risk asset class but usually earns the lowest rate of return over the long-term. Returns may not keep up with inflation.

See where LGIAsuper's cash investments are held.

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Need more information?

For full details on all of our investment options read our Investment choice guide.

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Understand risk and return

Returns can rise or fall. See what risks exist and how they can affect your investment.

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Explore your options

Learn about LGIAsuper's range of investment options and make a choice that best suits your needs.

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