Investment

Asset classes: Alts

25 Jul 2023 4 min read

An asset class is generally defined as a group of assets that share similar characteristics. ‘Alts’, however, are grouped together not by their inherent similarities, but by the fact that they don’t fit neatly into what are considered the main or conventional asset classes of equities (shares), bonds and cash — ‘alts’ is simply an abbreviation of ‘alternatives’.

Some (but not all) of the investments that are included in the definition of alts are:

  • private equity, which simply refers to investing in a private (as opposed to public/listed) company
  • hedge funds, where a partnership of investors use their pooled funds to actively focus on generating higher returns than the benchmark, often through using derivatives and leverage (borrowing to invest)
  • multi-asset funds, which are what they sound like — funds that contain more than one asset class, say shares and cash
  • insurance-linked strategies, whose value is correlated to insurance-related risks (such as natural disasters) rather than the movement of financial markets
  • distressed debt investing, which is investing in the debt of a financially distressed (but otherwise successful) company or other entity
  • commodities.

Why invest in alts?

Alts are not commonly invested in by individuals (‘retail investors’) because they can be complex, risky and illiquid. Some alts offer investors a higher return and risk profile. Within a well-managed investment portfolio, their role is generally to provide diversification and balance overall portfolio risk.

NGS Super’s alternative investments

The table below shows the role that alts play in NGS’s pre-mixed investment options.

  Strategic asset allocation
(SAA)
Dynamic asset allocation
(DAA)
Diversified MySuper 10.5% 0-20.0%
High Growth 25.0% 0-40.0%
Balanced 7.0% 0-10.0%
Defensive 6.4% 0-15.0%
Indexed Growth 0.0% 0-15.0%
Diversified (Income account only) 10.5% 0-20.0%
Retire Plus (Income account only) 6.8% 0-15.0%

NGS’s alternative investments include some interesting private market assets that are designed to solve pressing health and environmental problems and create a positive impact, including:

  • Inari, pioneering seed technology for agriculture that will increase yields and reduce use of nitrogen and water
  • Vow, developing cultured meat that is delicious, nutritious and sustainable
  • Invaio, creating plant health solutions that are good for farmer, society and the environment
  • Oricell Therapeutics, developing affordable drugs for tumour therapy
  • Loam bio, using microbial technology to capture carbon in agricultural soils.

See how we're investing for impact

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