AUSTRALIA - Russell Investments has launched its first after-tax fund to maximise returns for superannuation investors.
The Russell After-Tax Australian Shares Fund provides investors with exposure to a diversified portfolio of Australian equities using ‘sophisticated' tax strategies to enhance after-tax returns net of fees, said Russell. Some of these strategies include turnover management, optimising capital gains tax, emulation, off-market share buybacks and franking credits (a unit of tax passed on to shareholders alongside dividends).
The fund will provide pooling and scale benefits tailored to maximise returns for investors who have a 15% tax rate instead of compromising tax decisions for those on different tax rates, said the firm.
Russell director of after-tax investment strategies Raewyn Williams said: "As recognised by the Cooper Review, tax implications can have a significant impact on investment returns. Despite this, there is a widespread lack of awareness around after-tax investing (ATI) and a dearth of products that combine active management with tax strategies."
According to Williams too many super funds are using a low turnover approach to manage tax implication which does not always provide the best after-tax outcome. This fund adopts a ‘turnover management' approach where trading is more flexible. It also uses an emulation strategy to capture alpha-seeking insights from multiple managers.
At least one superannuation fund has addressed the need for a tax-sensitive investment strategy.
In June, QSuper hired State Street Global Advisors to run a series of so-called "tax-aware" portfolios worth a combined A$10bn ($10.1bn). SSgA manages an Australian equities, international equities and global REIT passive mandates. (Global Pensions; 30 June 2010)
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