The industry fund for the people who care
Health Super's investment options all have different objectives. These options are invested in different types of asset classes to seek to achieve these objectives.
The main asset classes are:
Cash generally refers to investments in bank bills, commercial paper and similar securities that have a short investment timeframe, i.e. typically less than one year. Cash investments generally provide a stable return, with negligible potential for capital loss.
Fixed interest securities, or bonds, can be thought of as loans. You pay cash for the bond, and in return, you receive regular interest payments from the bond issuer for an agreed period of time. The value of the bond can fluctuate based on interest rates and investor sentiment. When the bond matures, the loan principal is repaid in cash. Historically, bonds have provided a less volatile investment than share markets due to their stable interest payment.
Shares represent part ownership of a company (Australian or international) and are generally bought and sold on a stock exchange. Shares are generally considered to be more risky than most other asset classes because their price tends to fluctuate more than other asset classes. International shares may also be affected by currency values. However, over the longer term, shares tend to outperform other asset classes.
Alternatives refer to a wide range of non-traditional assets (for example, private equity, corporate bonds, infrastructure and hedge funds). Alternative assets can have a higher risk profile and may be less liquid (less easily turned into cash in a timely manner) than other investments. Some alternative investments may experience volatile movements in prices due to potentially higher risk levels.
We may invest in alternative asset classes to take advantage of investment opportunities that may arise in these markets, while also diversifying our sources of return and risk.
Alternative assets are divided into alternative growth and alternative defensive based on each asset’s risk/return profile.
Alternative growth assets are investments that are expected to provide higher long-term return opportunities, but potentially have greater risk or volatility. Alternative defensive assets might include investments with a lower return, but are generally more consistent (i.e. may not have the growth potential of some other higher risk investments).
For example, property, which is sometimes treated as its own asset class, is considered part of alternatives in relation to our investment options. Property generally involves investing directly, through an unlisted or listed trust. Each trust may hold real property investments in sectors such as offices, industrial or retail property. Listed property trusts are generally quoted on the stock exchange and units in those trusts are bought and sold like shares. Depending on the risk/return profile of a property investment, it may be considered an alternative growth or alternative defensive asset.
Over the long term (more than five years), growth assets such as shares and alternative growth assets tend to achieve greater returns than defensive assets such as cash, fixed interest and alternative defensive assets. However, it is important to note, that growth assets may experience greater volatility in returns.