Tax-managed portfolios are equity separate accounts that target a client-designated index. They seek to provide the consistent performance and diversification of index-based investing with active tax management and per-client customisation.
Tax management works by constructing a portfolio to track a superannuation fund’s (or other investor's) desired passive (or smart beta) exposure, and then add a tax-efficient overlay customised to the tax preferences of the fund’s superannuation members (accumulation, transition to retirement, pension) or investors.
This process helps Parametric to implement the fund’s positions as a tax-managed passive exposure, with pure agency execution, and reports outcomes, pre & post tax, against the fund’s desired exposure.
The benefits of these accounts can include: the lower costs of passive management, including lower tax and transaction costs, and reduced conflicts of interest of active managers. For superannuation clients, the program is also designed to address APRA’s scale & operational efficiency demands, and to meet the trustee duty to manage funds on an after-tax basis. Depending on individual circumstances and preferences, these methods can be used to address specific investor goals or issues related to overall portfolio risk, liquidity and tax efficiency.