Tax-exempt investors leaving money behind

Tax-exempt investors leaving money behind

Tax-Exempt Investors Leaving Money Behind

  • 25 June 2013
  • Australia, Melbourne

Australian tax-exempt investors, including many retirees, are leaving money on the table when investing in Australian shares, according to Mercer. These investors may not be maximising after-tax returns or effectively measuring the value of their Australian share investments because they lack an after-tax benchmark. 

Mercer has launched a new multi-manager fund to enable tax-exempt investors to maximise their after-tax returns. The Mercer Australian Shares Fund for Tax-Exempt Investors is designed for endowments, not-for-profits (NFPs), and superannuation funds with members in the post-retirement phase.

"The Fund is a portfolio ‘building block’ essential for Australian tax-exempt investors. It is also particularly relevant and timely for super funds as more members approach retirement,” said Mercer Principal, Craig Hughes, who leads a Mercer team focused on delivering investment advice and solutions to endowments and foundations.

“Australian tax-exempt investors have a tremendous opportunity to maximise after-tax total returns from their Australian share investments but, for too long, have had limited scope to customise their exposure according to their tax status. 

“Our new solution ensures our investors’ exposure to Australian shares is managed with their tax exempt status in mind. We understand that many tax-exempt investors don’t have the time or resources to focus on being ‘tax aware’ at all times and that’s why we have established a fund for them.

“The Mercer Australian Shares Fund for Tax-Exempt Investors will maintain a well-diversified active manager structure. The Fund is targeting a 1.5% - 2.5% pa outperformance over the ‘grossed up’ after-tax benchmark over the medium to long term.  Investment reporting is also undertaken on an after-tax basis,” said Mr Hughes.

“We know tax-exempt investors have a distinct advantage when investing in Australian shares due to their tax status and the favourable treatment of dividends and franking credits. However, it is not enough to simply have a high dividend yield approach. 

“These investors need to maximise total after-tax returns. Our new solution combines the power of capital growth, yield and franking credits to achieve that objective.

"Securing funding from private philanthropy or government sources is difficult enough for the NFP sector. Once they have secured those funds, it's critical that they not only manage those funds prudently, but continue to grow them over time,” Mr Hughes said.

The Mercer Australian Shares Fund for Tax-Exempt Investors now forms the Australian shares portfolio of the Mercer Superannuation Trust’s Allocated Pension Division. 

The fund will be measured against the S&P/ASX 300 Accumulation Index grossed up for franking credits and has an asset mix of 100% growth investments. The current fund manager line up is a multimanager combination of JCP Investment Partners, Macquarie Investment Management and Plato Investment Management.

About Mercer

Mercer is a global leader in talent, health, retirement and investments. Mercer helps clients around the world advance the health, wealth and performance of their most vital asset – their people. Mercer’s 20,000 employees are based in 43 countries and the firm operates in over 140 countries. Mercer is a wholly owned subsidiary of Marsh & McLennan Companies (NYSE: MMC), a global team of professional services companies offering clients advice and solutions in the areas of risk, strategy and human capital. With 55,000 employees worldwide and annual revenue exceeding $12 billion, Marsh & McLennan Companies is also the parent company of Marsh, a global leader in insurance broking and risk management; Guy Carpenter, a global leader in providing risk and reinsurance intermediary services; and Oliver Wyman, a global leader in management consulting. Follow Mercer on Twitter @MercerAU @MercerInsights