Investment with after-tax returns in mind could return another 1 per cent in a rising market to superannuation fund members, a management services group has said.
Parametric managing director Scott Lawrence said effective after-tax investment would become even more important in the wake of the government’s reform changes to superannuation, in particular MySuper and Stronger Super.
“Trustees have a duty to maximise net returns after fees, costs and taxes. People say ‘I don’t want tax to drive my investment strategy’,” he said, but tax had to be taken in to account at almost every stage of investments.
“The (Australian) industry has more steps to take on this, and some funds have more steps to take than others.”
On the whole, industry funds were further ahead than members in examining after-tax strategies, especially in view of MySuper, he said.
In the United States, measurement of managers’ after-tax returns was legislated, Lawrence said, but this was not the case in Australia, where reported returns were before-tax.
Parametric’s research indicates that generally, value porfolios tend to have a higher tax cost than growth portfolios.
Parametric’s base is in the US where it has more than 12,000 individual tax-managed accounts which can drill down to the per-lot figures for each client’s listed equities.
In the US, the company managed $47.9 billion , and “we will be managing a portfolio in Australia soon”, Lawrence said.
