Centralised Portfolio Management (CPM)
Centralised portfolio management (CPM) is designed to offer clients their desired multi-manager equities exposure all within a single coordinated portfolio. Parametric’s role as a CPM manager is to provide the pre-tax return of a combination of asset managers or styles while managing total portfolio risk and taxes. CPM creates a customised investment vehicle that fully integrates and coordinates the three dimensions of equity portfolio management: return, risk and implementation costs, including taxes.
Centralised coordination of multiple managed portfolios removes many of the implementation frictions innate to multi-manager structures, provides performance management and measurement on a genuine after-tax basis, and offers account customisation all within a single, transparent account structure. The single account structure provides superannuation funds (and other investors) with an easy way to implement strategic and opportunistic positions across their entire equities portfolio with flexibility and agility. Also, the fund will no longer need to use a transition manager to implement portfolio or manager changes.
CPM works by tracking the fund’s active multi-manager exposure as a desired target or customised benchmark and eliminates overlapping and unnecessary trades by implementing the fund’s objectives across multiple managers’ positions as one centralised portfolio, with pure agency execution. For taxable accounts we can add a tax-efficient overlay customised to the client's preferred tax profile. Parametric implements positions as quickly as possible and, unlike old-style ‘emulation’ strategies, does not deliberately lag trades.
A CPM structure can provide funds with a practical, cost-effective way of obtaining equities exposure with manager and style diversity. As an added benefit, CPM addresses a number of harmful implementation inefficiencies inherent in a traditional multi-manager equity structure and offers significant potential value to funds well beyond higher returns from addressing tax efficiencies.
A CPM structure can also allow funds to implement their responsible-investing principles through centralised proxy voting. In a multi-manager equity portfolio structure, fund trustees can direct each manager to vote proxies in accordance with their own fund’s responsible-investing policy. CPM streamlines this process, since the implementation manager will adopt the fund trustee’s centralised proxy-voting policies and will vote the entire equity portfolio accordingly.
Further, funds that adopt CPM can segregate accumulation and pension assets in a simpler way.