Parametric launches ’Equity Agility Platform’ for Australian super funds to manage moving targets around returns, fees and costs
Super funds will increasingly need investment partners that offer ‘equity agility’ as a core feature to help navigate the mounting pressure to improve returns and lower investment fees, other costs and taxes. The complex task of meeting these goals, says global implementation specialist manager Parametric, is made harder by the fact that they are becoming moving targets.
Chris Briant, Head of the Eaton Vance affiliate’s Australian business, says this pressure is coming from a raft of increasingly vocal super stakeholders including members, politicians and regulators, with APRA’s controversial MySuper Product Heatmap a prime example.
“APRA is using the Heatmap to highlight funds that they believe are either delivering poor net-of-tax returns or have high fees, and focusing on their long-term sustainability based on cashflows. It dovetails with APRA’s plan to have fewer funds, so all funds are under enormous pressure to ’measure up’. But ‘measuring up’ is itself a moving target – we saw this recently in the second iteration of the Heatmap, where some funds’ gradings changed dramatically from the first Heatmap.
“At the same time COVID-19 Early Release has, somewhat ironically, proved a great engagement mechanism for fund members; and we’ve seen some politicians use the current environment opportunistically to grandstand on super. Funds were recently told by Senator Jane Hume (Assistant Minister for Superannuation, Financial Services and Financial Technology) that scrutiny and pressure to rationalise and evolve will be ongoing.”
Briant says the new reality for funds is that their positioning is never ‘finished’ and ‘equity agility’ should be a key part of responding to this new reality, prompting Parametric to launch an ‘Equity Agility Platform’ for Australian super funds – Australian or global equity holdings in a ‘one-stop shop’ Investment Management Agreement (IMA).
“This IMA might be set up for a certain purpose, like passive equity exposure, but can pivot easily from goal to goal as the fund’s needs change; for example, to change benchmarks, add a defensive tilt, serve as a ‘carpark’ when the fund is between managers, plug an unwanted risk exposure, add or remove emerging market exposure, quickly address ESG-related concerns or even chase less orthodox return sources such as equity put and call writing.
“A valuable added benefit reflects Parametric’s pedigree in managing taxes, brokerage and other implementation frictions for super funds. It’s not cost-free for funds to constantly adapt portfolios to their moving targets around returns, fees and other measures. As with the ‘Equity Agility Platform’ accounts we’re already managing, the transition management is built in, so we can manage the costs of making these changes along the way.”
Briant says offering the platform more broadly was prompted by Parametric’s existing work with clients which highlighted the need to deliver solutions that empower funds in three crucial ways: to be able to pivot the portfolio quickly, cost-efficiently, and in a targeted way that focuses on what role the equity portfolio needs to perform for the fund at that time. Parametric’s view is that these needs are not being well met - key reasons why the idea of an ‘Equity Agility Platform’ seems to be striking a chord with super funds.
“Funds are under pressure, more than at any time in their history, and the idea of a transition manager here, a passive manager there, a quant manager over there, an ESG manager added to the mix, an overlay manager sitting across the top, et cetera is becoming increasingly unwieldy in this change environment. What they want is an implementation partner that can pull it all together with a low-cost, simple, transparent fee structure, and stay alongside them as their needs change.
“An ‘Equity Agility Platform’ account ticks all the right boxes for funds and combines the investing thinking and thought generation done within funds with the execution of a trusted investment partner. A platform like this is a powerful response to an environment where the goalposts for funds can change, and change rapidly, and the livelihood of some funds is at stake.”
For more information please contact:
Simrita Virk at Shed Connect
Parametric Portfolio Associates® LLC (Parametric), headquartered in the U. S. in Seattle, Washington, is registered as an investment adviser with the Securities and Exchange Commission (“SEC”) under the Investment Advisers Act of 1940. Parametric’s advisory services are offered and promoted in Australia by its affiliate, Eaton Vance Management (International) Limited (‘EVMI’). EVMI is authorised and regulated by the Financial Conduct Authority (“FCA”) in the United Kingdom and is located at 125 Old Broad Street, London, EC2N 1AR. Parametric and EVMI are both indirect, wholly-owned subsidiaries of Eaton Vance Corp. Parametric and EVMI are exempt from the requirement to hold an Australian financial services license under the Australian Corporations Act 2001 (Cth) (Corporations Act) in respect of the provision of financial services to wholesale clients as defined in the Corporations Act and pursuant to the Australian Securities and Investments Commission's (ASIC) Class Order 03/1100 and 03/1099, respectively. SEC and FCA rules and regulations may differ from Australian law. Parametric and EVMI are not licensed tax agents or advisers and do not provide tax advice in Australia or any other country. This material is intended for wholesale use only and is not intended for distribution to, nor should it be relied upon, by retail clients.
With $287.4 billion USD of assets under management as at April 30, 2020, Parametric is a global asset management firm offering investors a variety of portfolio solutions, including tax-managed centralised portfolio management, tax-managed indexing and factor investing strategies, as well as emerging markets and defensive equities strategies. Parametric Portfolio Associates® LLC is a wholly owned subsidiary of Eaton Vance Corp., one of the world's most dynamic global asset management companies. Assistant Minister for Superannuation, Financial Services and Financial Technology.