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After-tax reporting a necessity for MySuper compliance: Parametric
Parametric managing director Scott Lawrence has said superannuation funds need to invest more in after-tax performance to meet MySuper requirements.
Lawrence said trustees have an obligation to maximise net returns for members under new MySuper legislation.
"The legislation that relates to MySuper products specifically says trustees need to have an investment objective to maximise net returns," he said.
Lawrence said that while superannuation funds were aware of the importance of after-tax benchmarks, they were unaware of how to resolve the issue.
He said super funds needed to invest in the technology to produce after-tax reporting so that managers could make the right decisions and maximise returns.
Lawrence said Parametric supplied the technology to Catholic Super, which has been using after-tax reporting for one year.
Chief investment officer for Catholic Super Garrie Lette said it was part of the fund's process of moving its Australian equity portfolio towards an after-tax outcome.
"So what Parametric gives to us is a customised benchmark…customised to the circumstances of each of the mandates we have got and then matching after-tax benchmark," he said.
Lette said it allowed it to compare the before- and after-tax performance of managers, but he did not expect it to impact on Catholic Super's investment strategy.
"Our managers have always assured us that they have always managed the portfolios with a view to our tax situation, and with a view to optimising after-tax outcomes, so we don't imagine it will make a major difference to the way the portfolios are managed, but at the margin we think it's the right thing to do," he said.
According to Lette, after-tax reporting will become "stock standard" in the next five years.
Lawrence said tax had an impact on most aspects of the investment strategy, and if funds wanted to implement an after-tax investment strategy, tax should be front and centre.
"Whether it's a change in asset allocation or a change in managers, usually tax has an impact," Lawrence said.
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