Asset classes

When you make an investment choice, you're choosing which mix of assets you would like your super or retirement savings invested in.

Asset types

TWUSUPER invests in a range of return-seeking assets and defensive assets.

Shares

When you buy shares you are buying part of a company. Your investment return will depend on how the company performs over time, economic factors and investors’ views of the company.

We invest in both Australian and international shares. By investing in international shares, you are investing in companies based overseas. This may assist in reducing the overall volatility of your total investment portfolio through increased diversification (ie spreading your risk across a range of investments).
International shares may also be subject to currency movements which can add to, or take away from, their returns.

Over the long term, returns from shares have tended to be higher than those achieved by some other assets (such as property, fixed interest and cash). However, over shorter periods, their performance tends to have more ups and downs.

Unlisted equity

Unlisted equity investments (also known as private equity) are investments that are not traded on the share market such as:

• venture capital funds (offering interests in private businesses in their early stage of development),and
• buyout funds (offering interests in more established companies).

We have chosen to minimise the risks involved in unlisted equity by investing in funds with managers that specialise in this sector. These fund manager take significant stakes in unlisted equity investments, as well as having an active role in monitoring and advising the private companies in their portfolios.

Unlisted property

Buying office buildings, shopping centres, industrial estates and other similar property investments is known as direct property investment. Investors can also invest in property trusts which, in turn, buy a variety of properties. These trusts may be listed on Australian or overseas exchanges, or they may be unlisted. Property is suitable for long term investment as it has the expectation of growth in value, but also experiences some volatility. The Fund may invest in listed property instead of unlisted property from time to time.

Unlisted infrastructure

Investments in infrastructure cover a range of industries including:

We invest in infrastructure through pooled infrastructure funds as they give investors exposure to a professionally managed and diversified portfolio of infrastructure assets.

Infrastructure funds are managed by specialist fund managers. Returns from infrastructure funds have a combination of capital growth (ie an increase in the value of the assets owned) and income (ie the income derived from the operation of the asset, eg toll road fees). The income generated by infrastructure assets is expected to be fairly predictable as these funds typically operate in environments with low levels of competition and high barriers to
entry. The Fund may invest in listed infrastructure instead of unlisted infrastructure from time to time.

For growth-orientated funds, the absence of stable income in the near term is expected to be compensated by capital growth in the medium term. On the other hand, some infrastructure funds have more mature assets that are generating steady income streams but less capital growth. We invest in both
income-orientated and growth orientated assets.

Credit

Credit is an asset class that consists of interest-bearing securities that are rated below investment grade. For example, a portfolio of debt securities that has an average Investment rating from S&P Global (Standard and Poor’s) that is below BBB-.

Credit securities offer a higher yield than investment grade securities to compensate for the risk that an issuer is more likely to default. They are also more volatile as security values will rise and fall in line with market perceptions of systematic risk, and these securities may become illiquid from time to time.

Fixed interest

Fixed interest investments are issued to investors by Australian and foreign governments, semi-government authorities and companies in return for cash. Interest is paid to investors over the life of the investment, usually at a fixed rate. These investments can generally be bought or sold before they mature, potentially resulting in capital gains or losses.

International fixed interest investments are normally fully hedged to remove the effect of adverse currency movements.

Fixed interest investments are less volatile than shares and property, but have a lower expected return in the long term. Over shorter periods, returns can be negative, particularly in situations where interest rates rise significantly.

Cash

Cash assets are overnight cash, deposits, money market securities and other interest-bearing investments that pay an interest rate that is linked to bank bill rates. Generally, the likelihood of loss or negative returns is minimal.

While volatility is low, the returns are also likely to be lower than those available from other asset classes over the long term.