QANTAS Super continues to innovate on implementation efficiency, applying a new structure for managing its Australian and global equities centrally, which is expected to save its members more than $9 million a year.
Chief investment officer of the $6-billion fund, Andrew Spence, said the move was the latest in a number of innovative solutions employed by QANTAS Super to deliver implementation efficiencies through better management of transaction costs.
The fund has also implemented an agency foreign-exchange program across its global equities and alternative assets, saving $1.4 million in the year to June 30, 2012.
“In these combined activities there is a 25-basis-points saving to our members’ bottom line,” he said.
This latest initiative is a partnership with Seattle-based firm, Parametric, that specialises in after-tax investing, benchmarking and reporting.
QANTAS Super has 45 per cent in listed equities, split between Australian (20 per cent) and global equities (25 per cent) and employs 12 equities managers.
“We have been working on this for a long time. We are trying to be innovative and the board has been very receptive to what is a very different philosophical approach.”
Spence said while QANTAS Super “strongly believes” in the fiduciary model and will not look to manage money inhouse, it also sees that there is significant value in managing the investment value chain.
“We are deconstructing the value chain and reconstructing it in a way that works for our members, rather than another part of the industry,” he said. “There are meaningful savings to be had by managing that process. We have created $10 million of value-add by better management without internalising any management of assets.
“We believe we can see where the gaps in the industry are and there are a number of participants who don’t necessarily add value in the chain. We are keen to ensure we continue to pay our investment partners appropriately because alpha is scarce, and we want access to the best managers. We think we can also be smarter on implementation efficiency,” he said.
Scott Lawrence, head of Parametric in Australia, said that the MySuper legislation has an explicit net-return investment objective that trustees have to target, which means considering fees, costs and tax.
“MySuper is a catalyst for trustees to take into account taxation consequences,” he said.
Spence also acknowledged the timeliness of this initiative in light of these new trustee obligations under Strong Super reforms to explicitly consider the tax consequences of investing and evaluate outcomes on an after-tax basis.
The chief executive of Parametric in Seattle, Brian Langstraat, says investors have the opportunity to save between 50 and 150 basis points a year through tax management.
Parametric, which is 90-per-cent owned by Eaton Vance, manages 12,000 portfolios and about $90 billion.