Understanding listed and unlisted assets

13 April 2023

Super may be the most important investment you have. Yet many people aren’t aware where their super invests. At AustralianSuper, we invest your super in a variety of assets to help enhance long-term returns. These assets fall into 2 main categories: listed and unlisted assets. Find out more about these investment types and what they mean for your super. 

Members often want to know what their super is invested in. We invest in a diversified mix of listed and unlisted assets, helping you avoid putting all your eggs in one basket. These assets include Australian shares, international shares, private equity, infrastructure, property, credit, fixed interest and cash. Having diversified investment options – with both listed and unlisted assets – helps us with the aim to achieve our objective to generate strong, long-term returns for members.

Listed assets

Listed assets are shares that investors can easily buy and sell in a market exchange environment. Listed assets are open to be traded regularly via a public exchange or market, such as the Australian Securities Exchange (ASX). Listed assets include Australian and international shares in the portfolio.  

The values of listed assets are subject to the ups and downs of investment market cycles. This can lead to large valuation increases or decreases over a single day, month or year. Holding shares for the long-term can enable investors to gain from their potential to increase in value over time.  

Unlisted assets

Unlisted assets are investments that aren’t listed on an exchange. This can include:  

• infrastructure (roads, power grids, and airports) 
• property (large office buildings and shopping centres) 
• private equity (investments in private companies) 
• private credit (loans to fund commercial real estate construction or loans made to infrastructure assets) 

Unlisted assets are an integral part of most member investment options, as they provide diversification so you’re not putting all your resources into one place. They can also offer relative return stability and have historically provided better long-term risk-adjusted returns¹.  

While unlisted assets are often grouped together, there are big differences between unlisted infrastructure, unlisted property, private equity and private credit. That’s why AustralianSuper invests in several types of unlisted assets.  

Infrastructure investments

Infrastructure investments provide money to develop or maintain assets that are essential services or facilities, such as: 

• transport
• energy generation and transition 
• utilities
• telecommunications

These types of investments can improve living standards, as well as a country’s economic development. Infrastructure projects often rely on large upfront investments. 

Property investments

Property investments involve directly acquiring property, such as: 

• residential
• retail
• industrial
• commercial

Returns can be generated from increases in the property value – due to development and price growth – or rental incomes. Careful management can help an owner boost the value of the property and generate a higher income. 

Private equity investments

Private equity investments provide money for private companies that aren’t listed or publicly traded. The most common categories of private equity include: 

• venture capital (funding for new or expanding companies) 
• growth capital (money needed to expand or restructure operations) 
• leveraged buyouts (borrowing money to buy another company) 

Private equity investments provide start-up capital, growth capital or assist with a company’s restructuring. 

Private credit investments

Private credit is a direct loan to fund opportunities, such as: 

• brownfield infrastructure assets 
• commercial real estate construction

Why does AustralianSuper invest in unlisted assets?

Unlisted assets have historically proven to be a great long-term investment for AustralianSuper members¹. They have distinct characteristics that provide benefits to a balanced portfolio. 

Diversification – not having all your eggs in one basket

Growing investment value over time requires balancing risk and reward. If you only invest in low-risk assets (such as cash), the long-term returns may be low. Investing in one type of growth asset, like listed shares, could also increase the risk of your portfolio.  

The valuations of unlisted assets are less correlated to the other asset classes, meaning that their inclusion in a portfolio can lower risk. Their valuations are not impacted as much by changes in the business cycle and therefore their returns are less volatile in the short term.  

Relative return stability – reducing downside risk

Compared to listed assets, unlisted property and infrastructure are less prone to short-term market volatility. Unlisted property and infrastructure can also generate steady income streams, for example: 

• income from rents locked in over a fixed-term contract period or  
• money generated from a toll road that’s subject to a long-term agreement 

Premium on returns – hard work can pay off

There are higher barriers to entry for unlisted assets, compared to listed assets. These barriers can provide a premium on their returns. For example, they:  

• are harder to sell or exchange for cash (known as illiquidity) 
• come with large transaction costs 
• need an extended timeframe for investment 
• are resource-heavy and often require specialists to evaluate opportunities and manage contractual terms 

As Australia’s largest superannuation fund, AustralianSuper has the size and investment capability to overcome these barriers at a reasonable cost.  

Better risk-adjusted returns

Risk-adjusted returns measure an investment return in relation to the risk taken to achieve that return. 

Unlisted assets have historically made better risk-adjusted returns when compared to many other asset classes¹. This provides the opportunity to extract additional return for the level of risk taken in the portfolio. 

Long-term focus – looking after your future retirement funds

Unlisted assets and superannuation funds share one thing in common: a long-term investment outlook. Like your super, unlisted infrastructure, unlisted property and private equity investments are generally held for the long term. This helps asset owners and government bodies make decisions to improve the long-term value of unlisted assets. In contrast, listed company boards may sometimes be pressured into making shorter term decisions – to meet shareholder expectations – which may affect long-term value. 

Considerations when investing in unlisted assets

The benefits of investing in unlisted assets do come with a trade-off: their illiquidity. They’re considered illiquid because they can be harder to trade or find buyers willing to transact at a given price.  

At AustralianSuper, we define illiquidity as not being able to sell an asset at its fair value within 3 months. During distressed market environments, it may not be possible to sell unlisted assets at a fair or reasonable price. AustralianSuper places limits on the amount of illiquid assets that are included in the PreMixed investment options to help manage liquidity risks. 

Like any investment, unlisted assets have the potential to go up or down in value. That means there’s a potential for negative returns. That’s why it’s important to have a longer-term investment outlook.  

Choose a super fund invested in your retirement

When it comes to your super, it’s important to choose a fund that puts you first. As an industry super fund, AustralianSuper is run only for members. We’re here to help members achieve their best possible financial position in retirement.  

References:  

1. Investment returns aren’t guaranteed. Past performance isn’t a reliable indicator of future returns.