Global investment manager Parametric has announced a second industry superannuation fund will use the firm's centralised portfolio management (CPM) strategy for Australian and international equities.
Queensland local government super fund LGIAsuper has appointed Parametric for the tax-managed CPM mandate, involving assets of about $3.5 billion. LGIAsuper invests more than $9.5 billion for about 90,000 members.
LGIAsuper currently uses seven Australian and nine international equity managers and many of these will transition to the CPM portfolio structure.
LGIAsuper investment manager Guy Rundle said the decision to implement Parametric's solution was based on its potential to improve after-tax returns for 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," Rundle said.
As a holistic after-tax investing and reporting solution, the move to CPM also assists LGIAsuper in meeting its legislative obligation to focus on after-tax, rather than pre-tax, investment returns.
Parametric Australasia chief executive Chris Briant said demand for active and passive after-tax solutions had been building recently.
"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," Briant said.
Parametric research published last year estimates that in general, a tax-managed CPM approach can add between 50 and 90 basis points a year (pre-fees) to a super fund's listed equities portfolio. Analysis of LGIAsuper's portfolio suggested that potential benefits within that range exist.
LGIAsuper is Parametric's sixth Australian client and its second large super fund to implement the CPM. The first was $7 billion Qantas Super which adopted the CPM structure in 2012 for its equity portfolios/
US-based Parametric has about US$153 billion in assets under management worldwide, including US$52.4 billion in tax-managed investment strategies.