Sub-Asset Class

Posted in Finance, Accounting and Economics Terms, Total Reads: 61
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Definition: Sub-Asset Class

Before explaining Sub Asset Class, let’s first discuss an Asset Class. An Asset class is a different kinds of Assets. For example, Equity, Fixed Income, Real Estate, Derivatives etc. Now the subcategory of an asset class is called as sub asset class.

The sub-asset class can be based on the Size, type, sector and maturity of that particular Asset Class. Also the collection of assets in a sub asset class have common characteristics.  The chart shown below will clear the picture between an asset class and a sub asset class.

 

Asset Class / Sub Asset Class

Stock

Bond

Real Estate

Private Equity

Commodities

Cash

Size

Large Cap
Mid Cap
Small Cap

-

-

-

-

-

Location

Developed Market
Emerging Market

Developed Market
Emerging Market

US Market
Foreign Market

US Market
Foreign Market

-

US Market
Foreign Market

Type

Value
Blend
Growth

Investment Grade
High Yield

REIT's
Property

Venture Capital
Leveraged Buyouts
Mezzanine Financing

Energy Products
Agricultural Products
Industrial Metals
Precious Metals

Bank Money Markets
Savings Account
Mutual Funds Market
T-Bills

Sector

Hard Assets
Healthcare
Technology

Government
Corporate
Municipal

-

Natural Resources
Healthcare
Technology

-

Government
Banks
Other Financial Institutions

Maturity

-

Long Term
Immediate Term
Short Term

-

-

-

-

 

Diversification is very crucial in a portfolio in order to minimize risk and maximize returns. Sub asset class helps in diversifying the portfolio by investing in varied subcategories of assets.

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