What Is an Asset Class Breakdown?
An asset class breakdown provides the percentages of core asset classes found within a mutual fund, exchange-traded fund, or another portfolio. Asset classes (in microeconomics and beyond) generally refer to broad categories such as equities, fixed income, and commodities. Often, sub-asset classes maybe reported in concentrated portfolios or for more granular detail.
Key Takeaways
- An asset class breakdown demonstrates how certain core asset classes are accounted for in an investment portfolio.
- Asset classes can include stocks, bonds, commodities, cash, real estate, and currencies.
- Asset class breakdowns help investors understand the nuts and bolts of their portfolios, management's goals, the distribution of funds, and the inherent risks.
Understanding Asset Class Breakdowns
An asset class breakdown represents the distribution of assets in a portfolio. Breakdowns are calculated by dividing the market value of a particular asset class'sholdings by the fund’s total assets. Comprehensive asset class breakdowns are typically provided to help an investor understand the fund's investment objective and risk management strategy.
Investing by asset class is a primary way for investors and professional portfolio managers to manage risk. Asset classes may include cash, fixed income, equities, commodities, and real estate. Each has its risk characteristics and return opportunities. Fixed income and equity investments are typically asset classes used for core holdings. Both have multiple investment options, with fixed income used for more conservative investments and equities used for more aggressive allocations.
Cash investments are the most conservative and can include high-yield savings accounts and money market funds.
Types of Sub-Asset Class Breakdowns
Sub-asset class breakdowns are also often used in due diligence fund reporting and can provide similar support for investors. Sub-asset class breakdowns may be used when a fund is highly concentrated in one asset class.
Fixed income sub-asset class breakdowns can include a wide range of loans, government bonds, corporate bonds, and municipal bonds. Equity sub-asset classes can consist of special categories such as real estate investment trusts (REITs) and master limited partnerships (MLPs). They may also include market capitalization breakdowns such as small-cap, mid-cap, and large-cap or investment styles such as growth stocks and value stocks. Investing in international investments canadd sub-asset class components for investments.
Example of Asset Allocation Breakdown
60/40 funds are a popular choice for investors seeking balanced asset allocation fund options. The BlackRock 60/40 Target Allocation Fund provides one example for investors. This Fund uses a fund-of-funds approach to provide a 60/40 asset class breakdown between equity and fixed income.
Individual fund holdings are used to provide exposure to various sub-asset classes, including U.S. stocks, developed market stocks, international stocks, and 7-to 10-year Treasury bonds. BlackRock's asset allocation fundsinclude the 40/60 Target Allocation Fund, 80/20 Target Allocation Fund, and the 20/80 Target Allocation Fund.
Special Considerations
The asset class breakdown is often used in marketing the fund to investors since it is a simple way to present the approximate risk profile of a fund. Asset allocation funds will generally vary by asset mix, often marketed as conservative, moderate, or aggressive funds.
Higher equity exposure is typically found in more aggressive growth funds. Moderate fundstend to have a balanced asset allocation approach that is evenly weighted between equity and fixed income. Overall, modern portfolio theory suggests that asset allocation can be a crucial determinant for total return potential and risk characteristics.
FAQs
Key Takeaways
What is an asset class breakdown? ›
An asset class breakdown represents the distribution of assets in a portfolio. Breakdowns are calculated by dividing the market value of a particular asset class's holdings by the fund's total assets.
What are the 6 asset class? ›
The main asset classes include (1) equities (2) debt (3) commodities (gold &precious metals, agricultural products, energy, etc.) (4) cash (5) currency (6) real estate and (7) alternatives. Each asset class has its unique traits, and each offers its own blend of reward and risk.
What is an asset breakdown structure? ›
Asset Breakdown Structure – Classification and Functions Asset intensive organisations need to have a clear specification of how assets are classified, i.e. grouped into similar types, what these classes do/don't represent and the attributes that should be collected for each class of asset.
What are the 4 types of assets? ›
Assets can be broadly categorized into current (or short-term) assets, fixed assets, financial investments, and intangible assets.
How do you identify an asset class? ›
The investment risk ladder identifies asset classes based on their relative riskiness, with cash being the most stable and alternative investments often being the most volatile. Sticking with index funds or exchange-traded funds (ETFs) that mirror the market is often the best path for a new investor.
What is the riskiest asset class? ›
Why Equities Are the Riskiest Asset Class. Equities are generally considered the riskiest class of assets.
What asset gives the highest return? ›
Which investment gives high return? Investments in equity or equity-oriented instruments, such as stocks and equity mutual funds, typically offer high returns. However, they come with higher risk compared to fixed-income investments. Real estate and certain types of ULIPs can also offer high returns.
What is the best performing asset class? ›
The best performing Asset Class in the last 30 years is US Technology, that granded a +14.40% annualized return. The worst is US Cash, with a +2.28% annualized return in the last 30 years. Asset Classes can be easily replicated by ETFs.
What are the five major assets? ›
Generally, you should consider five broad asset classes when constructing your investment portfolio: cash, fixed-principal investments, debt, equity, and tangibles. Cash refers to the most liquid holdings in your portfolio.
Class V: Other Tangible Property, including Furniture, Fixtures, Vehicles, etc. Class VI: Intangibles (Including Covenant Not to Compete) Class VII: Goodwill of a Going Concern.
What are the four primary asset classes? ›
Asset classes are the building blocks of any investment. The four main asset classes are cash, fixed interest, property and shares. Cash and fixed interest asset classes are what we call 'defensive' assets, which means they are designed to defend your investment from losses.
How many asset classes do we have? ›
There are five primary asset classes: real estate, fixed income securities, equities, marketable commodities, and cash assets, each serving unique purposes and risk-return profiles in an investor's portfolio.
What is the asset value breakdown? ›
To compute the net tangible assets of a company: The company needs to look at its balance sheet and identify tangible and intangible assets. From the total assets, deduct the total value of the intangible assets. From what is left, deduct the total value of the liabilities.
What is the breakdown of asset management? ›
As a basic definition, asset management is just managing client's money with the goal of growing that money, so generating returns, whilst mitigating risk. As for how the asset management company gets compensated, it's usually a fixed fee for managing the money, so a percentage% of the total assets under management.
What is asset allocation breakdown? ›
Asset allocation refers to distributing or allocating your money across multiple asset classes, such as equity, fixed income, debt, cash, and others. The primary purpose of asset allocation is to reduce the risk associated with your investment.
