What’s in a label

Rainmaker Information’s Alex Dunnin says classifying assets as growth or income is not always clear-cut or easy.

“The trouble is, people start to argue about how you should categorise some asset classes, like unlisted [direct] property and listed property. Is unlisted property that is held as, say, a building, a growth asset because the super fund expects it to grow in value or is it an income asset because it delivers rental income? It does both so a super fund may split how it classifies this asset.”

Similarly, some funds may describe their infrastructure assets as income assets because they deliver income streams much like how a bond does. But critics will say these are growth assets because they are property. The truth is, they are a bit of both.

“These factors mean that when investors start to delve into choosing their own investment options, they need to look under the bonnet and, while taking note of the formal categories, be mindful that there is ambiguity around these.

“While this may seem a bit unhelpful it’s not too different to how we should judge share funds. Some are aggressive, some are conservative, some are highly concentrated, some are deliberately speculative. Yet they are all 100% shares.”