LGIAsuper has appointed US investment manager Parametric to implement a tax-managed centralised portfolio management (CPM) solution for its Australian and international equity portfolios.
The CPM solution, involving assets of around $3.5 billion, is predicted to add between 50 and 90 basis points a year (pre-fees) to the listed equities portfolio, and is due to be implemented by the end of April.
LGIAsuper, which currently invests more than $9.5 billion in assets for around 90,000 members, uses seven Australian and nine international equity managers. Many of these managers will transition over to join the CPM portfolio structure.
Guy Rundle, investment manager at LGIAsuper, said: “The decision to implement the Parametric CPM solution is based on its potential to improve after-tax returns for our members and to improve portfolio transparency in terms of transaction costs.
“We are acutely aware that every dollar counts when it comes to growing members’ retirement savings. This is another way in which LGIAsuper is working to optimise the investment returns our members enjoy.”
LGIAsuper is Parametric’s sixth Australian client and its second large super fund to implement CPM. The first was Qantas Super, which adopted the CPM structure in 2012 for its equity portfolios and has since spoken on the benefits of the centralised approach.*
The Seattle-based Parametric is a US asset manager specialising in investment solutions that promote implementation efficiency and a focus on after-tax returns, with US$152.7 billion in assets under management worldwide, including US$52.4 billion in tax-managed investment strategies.
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Chris Briant, chief executive of Parametric Australasia, said: “We have seen the demand for our active and passive after-tax solutions building over the past few years. It takes time to work through understanding tax-managed CPM as a different type of investment structure, but as LGIAsuper worked through the process, the benefits became obvious.
“Parametric research published last year [The Road to Reward] estimates that in general, a CPM approach can add between 50 and 90 basis points a year, pre-fees, to a super fund’s listed equities portfolio, and analysis of LGIAsuper’s portfolio suggests that potential benefits within that range exist.”
*Updated on February 16 to more accurately reflect Qantas Super’s position.