Super fund members to reap benefits of after-tax focus
Super fund members could bank additional returns on taxable accumulation accounts due to a new focus on after-tax investing, a Russell Investments survey has found.
Recently introduced Stronger Super reforms include a mandatory requirement for funds to focus on after-tax returns as part of their investment strategy.
Pre-tax performance can under-estimate the value members gained off franking credits from Australian equities, Russell said. Conservative fund members could add 45 basis points, balanced option members 65 basis points and growth option members 80 basis points when franking was taken into consideration, according to the study.
Large cap managers generated annual additional alpha from franking of 27-53 basis points on average, while franking added 1.1 per cent to superannuation accumulation and 2.2 per cent for pension returns on average.
Russell Investment director of after-tax strategies, Raewyn Williams, said the results confirmed the benefit of introducing mandatory consideration of after-tax investment returns for super funds under new legislation.
However Williams said after-tax investing was not standard practice among fund managers.
The survey also found that tax could mask real performance, as some active managers appeared to be underperforming the market on a pre-tax basis but actually returned or beat the market on an after-tax basis.
"[By] focusing on the end goals that matter to members - after tax returns - portfolios can be holistically designed, constructed and managed to take into account the impact of tax," she said.
Recommended for you
The financial services technology firm has officially launched its digital advice and education solution for superannuation funds and other industry players.
The ETF provider has flagged a number of developments as it formally enters the superannuation space through a major acquisition.
While all MySuper products successfully passed the latest performance test, trustee-directed products encountered difficulties.
Iress has appointed Insignia Financial’s former general manager of master trust and insurance products as its newest CEO of superannuation, who will take over from Paul Giles.
