AUSTRALIA - The Sunsuper superannuation fund has awarded a A$700m mandate for domestic equities benchmarked to an index that measures the impact of capital gains tax (CGT) upon the performance of the largest 300 listed companies.
The A$17bn (US$18.2bn) scheme awarded the mandate to Vinvar Invsetment Managers, its first in which the return is pegged to a CGT-aware benchmark.
Sunsuper will use the FTSE/ Association of Superannuation Funds of Australia (ASFA) Australia Index Series, which was expanded in March of this year to provide superannuation funds with a measure of the effects of CGT, in addition to the effects of franking credits and off-market buy-backs.
"Until ASFA and FTSE came together, we didn't really have an index for after-tax returns," said David Hartley, CIO of Sunsuper. "We could guess, but it's been no more than guesswork. It's good to have a bit of mathematics behind the calculations to get a reasonable idea."
Sunsuper reports members' return on an after-tax basis, so benchmarking investment managers' return to after-tax metrics aligns the reporting. The fund is considering CGT across all asset classes, Hartley said. It is using a tax propagation service provided through its custodian, NAB Asset Servicing.
However, the impact of CGT can be balanced by the fact that due to a surging Australian dollar, many overseas investments are running at losses due to foreign exchange.
"There are two elements here," Hartley added. "We're looking at GCT from a total fund perspective is one thing - not just Australian shares, but [all assets]. But CGT is not such a big deal when you've got carried forward losses. With the Australian dollar going up so far, your Australian dollar valuation of many assets has gone down."
The People's Pension, Atlas Master Trust and The Cheviot Trust have been granted authorisation from The Pensions Regulator (TPR), taking the total number of authorised master trusts to 18.
Pension schemes have been warned they may now face a more challenging legal test if they wish to fix drafting errors.
The Greene King Pension Scheme has appointed XPS Pensions as its actuarial and investment adviser following a competitive tender process.
Professional Pensions has compiled a list charting the progress of master trust authorisation. View our list in full here...