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What is an asset class?

An asset class refers to a group of assets that are considered to have similar risk and return characteristics. VicSuper invests in 8 different asset classes which are summarised below.


Cash investments include a range of short and medium-term interest-bearing investments, such as term deposits, bank bills and treasury notes. For our diversified investment options, the Cash asset class can also include corporate debt and asset-backed securities which aim to add value while substantially retaining the low-risk characteristics of more traditional cash investments.

Typically the least risky of all asset classes, cash is often chosen by investors who want to access their money in the short to medium term. However, while the risk of negative returns from cash investments is much lower than for other asset classes, expected returns are also lower, particularly in a low interest rate environment. The buying power of your money may also be reduced as it may not keep up with inflation.

The value of a cash investment will fluctuate due to a number of factors, but primarily with the rise and fall in interest rates.

Fixed income (bonds)

A fixed income investment is a loan to a government, semi-government authority or large corporation in exchange for regular interest payments, plus repayment of the principal amount at maturity. Interest is paid to investors over the life of the investment, usually at a fixed rate. However, for some bonds, the interest payments and/or principal are adjusted for the rate of inflation. These are known as ‘inflation-linked bonds’ and they are designed to help protect investors from inflation.

While fixed income investments such as bonds are usually less volatile than many other investments like shares, they may also have a lower expected return over the long term. It is also important to note that fixed income investments are not without risk and do not provide a fixed rate of return like a term deposit. The fact that bonds are traded in a marketplace with buyers and sellers means they are exposed to price movements, and the possibility exists for low or negative returns from time to time.

Bond values are driven by prevailing interest rates and expected interest rate movements. In general, when interest rates rise, the market value of bonds tends to fall, and when interest rates fall, bond values tend to rise. This can have a significant impact on performance.

Equities (shares)

Equities (shares) are a portion or share of a company that can be bought or sold on an exchange. Equities allow investors to access both large and small listed companies across a range of industries in Australia and overseas (both developed and emerging markets). The return investors receive from investing in equities includes income in the form of dividend payments, as well as capital gains (and losses) from changes in the value of the underlying shares, and for international equities, currency movements.

Long-term returns from equity investments tend to be higher than those achieved from property, fixed income and cash investments. But in the short term, their performance is more volatile and returns can be negative, making them a higher risk investment. Various factors like consumer sentiment, commodity prices and company performance can all have an impact on a company’s share price.

Note that our Australian and international equities asset classes can also include a small exposure to unlisted companies which are less liquid than listed companies.

Credit income

Credit income covers a range of alternative debt investments. Like fixed income, credit income investments involve a loan to a borrower in exchange for regular interest payments, plus repayment of the principal amount at maturity. However, compared to traditional fixed income investments, the loans are typically to borrowers with a lower credit rating, and as a result, may command a higher rate of return to compensate the investor for the risk of default. Credit income investments include loans to a range of companies in Australia and globally across a variety of industries including infrastructure, real estate and various corporate sectors.


Property investments include office buildings, shopping centres and industrial estates, residential property such as apartment buildings and retirement villages, and property businesses. Investors can access property investments either directly or indirectly by purchasing units in a property trust (unlisted or listed) and the property investments may be in Australia or global.

Direct and unlisted property investment returns reflect a combination of rental income and capital growth, and are dependent on a range of economic factors such as interest rates and employment, as well as the location and quality of properties.

Listed property investments (often known as Real Estate Investment Trusts or REITs) are investments in their own right and like shares, their returns also reflect general market sentiment. Returns from listed property securities are therefore different (and more volatile) than the returns earned from owning direct or unlisted property investments.

Property investments are subject to a moderate to high degree of risk and are typically most suitable for long-term investors seeking high growth over the medium to long term, who are willing to accept fluctuations in returns and the possibility of negative returns over the short term.

Infrastructure and real assets

Infrastructure assets are the utilities and facilities that provide essential services to communities. Examples include utilities (electricity, gas, water and communications), power (including renewables), transport (airports, seaports, toll roads and rail), social infrastructure assets (hospitals, education facilities and community infrastructure such as a convention centre) and agriculture (including land and water assets, as well as timber assets). New infrastructure sub-sectors which exhibit similar features to traditional infrastructure investments, for example land title registries, have also developed over time.

Infrastructure investments can be accessed either directly or indirectly by acquiring an interest in an unlisted or listed infrastructure investment.

Because they often require substantial upfront investment, unlisted infrastructure investments typically have high barriers to entry, but generally offer investors a steady income stream, potential for capital growth over the long term, and lower volatility than other growth assets such as equities. However, there are risks. For example, changes to government regulations, usage rates, and interest rates may affect their value.

By contrast, listed infrastructure investments are investments in their own right and like shares, their returns also reflect general market sentiment. Returns from listed infrastructure securities are therefore different (and more volatile) than the returns from owning direct or unlisted infrastructure investments.

Private equity

Private equity includes investments in Australian and overseas companies that are not listed on a stock exchange. Such companies can include large established companies needing investment and expertise to support future growth plans, as well as smaller, rapidly growing businesses.

The private equity market is less efficient and less regulated than listed equity markets. This creates opportunities for skilled managers to add value. However, private equity investments are typically illiquid and high risk, and so are typically best suited to investors with a medium to long-term horizon.

Liquid alternatives

Liquid alternatives include a range of non-traditional strategies such as real return strategies and hedge funds. Unlike traditional fund managers which are often restricted to investing in a single asset class (eg Australian equities), these managers have a wider range of allowable investments and are able to utilise a combination of equities, bonds, currencies, commodities and other liquid asset classes. They can make investments in these asset classes via physical exposures or, more typically, via derivatives.

The managers we partner with to manage this asset class are selected for their potential to provide strong diversification, or to deliver returns above CPI (or an official cash rate) by dynamically moving around their exposure to different asset classes.

We differentiate between growth-oriented and more defensively oriented liquid alternatives strategies. The growth-oriented strategies are focused on generating strong capital growth but can also carry a high level of risk. By contrast, the defensively-oriented strategies aim to reduce total portfolio risk by providing positive returns when equity markets experience large negative returns.

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