SYDNEY, 2 July, 2012 – Russell Investments has today announced the launch of a new Australian equities after-tax benchmarking survey designed to give superannuation funds and their fund managers a simple and transparent way of measuring and ranking after-tax returns. A unique industry offering, the survey provides an independent benchmark to measure and compare investment outcomes both on a pre-tax and after-tax basis – a requirement for superannuation fund investors under the Stronger Super reforms.
Raewyn Williams, Russell’s director of after-tax investment strategies, said the new Russell survey aims to help fund managers understand their performance after tax, as well as answer questions clients may have around after-tax performance in light of the new legislative requirements.
“We believe this is the only survey that allows strategies to be easily compared on an after-tax basis. It will measure what really matters to superannuation funds – real, after-tax investment returns to members. This will help superannuation funds compare managers based on after-tax, not just pre-tax, performance. The survey will also help fund managers to benchmark where their strategies are at and will provide valuable information to address their investors’ increased interest in how their portfolios, and Australian equities as an asset class, are performing on an after-tax basis,” she said.
The survey will report both the pre-tax returns of Australian equities strategies and the after-tax return; that is, adjusted for the tax value of franking credits as applicable to superannuation funds. Off-market share buy-back performance will also be reported. Equity strategies will be ranked based on after-tax performance rather than pre-tax performance as in traditional surveys.
“It’s short-sighted to overlook the impact of franking credits as they represent about 1.4% of a large-cap Australian equities benchmark return each year. This is valued at around 70 basis points a year in additional returns to Australian equity super investors, yet is ignored in traditional surveys,” said Ms Williams.
For super funds in the pension phase, it is even more important to have a survey that captures franking credits. These represent about 140 basis points a year in additional returns (yield) for pension fund investors. Active Australian equity strategies can reasonably generate above-benchmark franking returns worth an additional 50 basis points to super investors, and more if off-market share buy-backs are on offer.
Russell was sought out by several industry participants to produce the survey as Australia’s only consulting practice with dedicated after-tax investing expertise. A few superannuation funds have engaged Russell to run specific consulting projects to transition from a pre-tax to an after-tax investment focus. Russell is calling on all fund managers to participate in the initial survey which will rank all strategies based on after-tax returns for the year end June 30 2012. Future surveys will be produced on a quarterly basis.
“Our aim is to help fund managers give their superannuation investors a more complete picture of what their investment performance looks like and how well the managers are serving them. Adding the tax piece is a crucial step forward. It’s encouraging to see the industry pay greater attention to after-tax measurement but it’s obvious more can be done and we believe this survey will help close the reporting gap in this increasingly important field,” said Ms Williams.
If you are a fund manager interested in participating in the survey please e-mail aftertaxsurvey@russell.com before 6 July 2012.
Russell Investments (Russell) is a global asset manager and one of only a few firms that offers actively managed, multi-asset portfolios and services that include advice, investments and implementation. Working with institutional investors, financial advisors and individuals, Russell’s core capabilities extend across capital markets insights, manager research, Indexes, portfolio implementation and portfolio construction.
Russell has approximately $155 billion in assets under management (as of 3/31/2012) and works with 2,400 institutional clients, more than 580 independent distribution partners and advisors, and individual investors globally. As a consultant to some of the largest pools of capital in the world, Russell has $2.4 trillion in assets under advisement (as of 12/31/11). It has four decades of experience researching and selecting investment managers and meets annually with more than 2,200 managers around the world. Russell traded more than $1.5 trillion in 2011 through its implementation services business. Russell calculates more than 80,000 benchmarks daily covering 98 percent of the investable market globally, 85 countries and more than 10,000 securities. Approximately $3.9 trillion in assets are benchmarked to the Russell Indexes.
Headquartered in Seattle, Washington, USA, Russell and has offices in around the world including Amsterdam, Auckland, Beijing, Chicago, Dubai, Frankfurt, London, Melbourne, Milan, New York, Paris, San Francisco, Seoul, Singapore, Sydney, Tokyo and Toronto. For more information about how Russell helps to improve financial security for people, visit www.russell.com/au or follow us on Twitter @RussellInvestAU.
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Issued by Russell Investment Management Ltd ABN 53 068 338 974, AFS Licence 247185 (“RIM”). This document provides general information only and has not been prepared having regard to your objectives, financial situation or needs. Before making an investment decision, you need to consider whether this information is appropriate to your objectives, financial situation and needs. This information has been compiled from sources considered to be reliable, but is not guaranteed. Past performance is not a reliable indicator of future performance. Any potential investor should consider the latest Product Disclosure Statement (“PDS”) in deciding whether to acquire, or to continue to hold, an investment in any Russell product. The PDS can be obtained by visiting www.russell.com.au or by phoning (02) 9229 5111. RIM is part of Russell Investments (“Russell”). Russell or its associates, officers or employees may have interests in the financial products referred to in this information by acting in various roles including broker or adviser, and may receive fees, brokerage or commissions for acting in these capacities. In addition, Russell or its associates, officers or employees may buy or sell the financial products as principal or agent.
Copyright 2012 Russell Investments. All rights reserved.
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