The Sting in the Transition Tail
The sophisticated world of large superannuation fund investing demonstrates an age-old aphorism: The only constant is change. Many investment changes require careful transition management from a superannuation fund’s existing set of portfolio exposures to a new target set of exposures. Funds typically use specialist managers due to the risk and complexity of transition management. Yet most transition managers—and funds themselves—have a blind spot around one cost of transitions: tax.
In our latest whitepaper, we work through a hypothetical equity transition scenario to investigate this blind spot and discover a typically ignored tax sting in our transition tail more than six times larger than the always addressed impact of transaction costs.