Often, they express this by explaining how much of their fund will be invested in different “asset classes”. That’s really just a name for different groups of investments that have similar characteristics and behave in similar ways in the market. Different people classify investments differently but if Heffron is helping you to document your investment strategy, these are the names we’ll use and what they mean.
Common asset classes in an SMSF
| Asset Class | Description of the asset |
|
Australian equities |
Shares in Australian companies. They might be shares in a company listed on the Australian Stock Exchange (for example, Westpac Limited) or they might be shares in a private company. Both types are Australian Equities.
|
| International equities |
Shares in foreign companies. Again, they might be listed on a stock exchange in New York, London or elsewhere or they might be private companies based overseas.
|
| Direct property |
If your SMSF is going to buy a property, classify this as “direct property” – it really just means property the fund owns directly rather than (say) investing in a property trust.
|
| Listed property |
Property trusts are structures set up to buy property where each investor owns units in the trust rather than owning a share of the property directly. Property trusts where the units can be bought and sold on the Australian Stock Exchange are known as “listed property”. They’re also often called REITS (real estate investment trusts).
|
| Unlisted indirect property |
Not all property trusts are listed on the Australian Stock Exchange – and this classification of “unlisted indirect property” is used for those that aren't. This classification can also include situations where the SMSF invests in a private unit trust that owns property – for example, one that is set up just for the SMSF.
|
| Australian Fixed Interest |
Fixed interest investments are – as they sound – assets where the fund receives a regular interest payment for a specific period of time and the money gets paid back on maturity. The sorts of investments that go into this category would include term deposits, government bonds, corporate bonds, capital notes, debentures and income securities. It only includes those investments in Australia.
|
| International Fixed Interest |
The international equivalent of the above – it would include a corporate bond issued by a foreign company, for example.
|
| Loans |
It’s rare but some SMSFs lend money to third parties or businesses. Their “investment” is the loan and it would fall into this category.
|
| Cash |
This is essentially money in Australian bank accounts.
|
| Foreign cash |
Foreign cash would include money in a foreign bank account or in a foreign currency.
|
| Other |
Everything else goes in here! Often funds that invest in crypto currency, collectables would have something in the “other” category.
|
