Super funds merging need to find ‘scale dividends’

29 January 2021
| By Jassmyn |
image
image
expand image

Using centralised portfolio management (CPM) for superannuation funds looking to merge could allow the funds to find their “scale dividends”, according to Parametric Portfolio. 

Parametric said merging funds needed to deliver investment solutions that better matched the needs and preferences of fund members at the right cost. Funds that failed to do this would be meagre, and members could face more limited, ill-fitting options that simply passed on returns and culture dilution, and at worst “mission drift” could substitute super funds as the neo-bank conglomerates of the future. 

Parametric head of research, Australia and New Zealand, Raewyn Williams, said CPM used the best ideas of each super fund’s individual funds managers and managed them in a single live portfolio that removed tax and trading inefficiencies.  

She said the benefits of this process included:  

  • Stripping out redundancy, uncompensated risk and other inefficiencies that would otherwise survive the merger; 
  • Being able to pivot to meet key strategic objectives; for example, to reflect lower fees, better ESG characteristics or a lower (or higher) risk appetite; 
  • Preserving portfolio value through the investment rationalisation process via intentional management of taxes and transaction costs; 
  • Implementing the investment-related deliverables of the fund merger in a timely fashion, consistent with the broader fund merger timetable; and 
  • Being able to target the investment-related ‘wins’ from the merger as a contribution to the merger’s broader success. 

“In our view using CPM will allow them to move to the implementation phase of the investment rationalisation project with a detailed understanding of the expected portfolio holdings, risks, fees, tax positions, environmental, social, and governance, and other sensitive attributes of the newly designed, rationalised portfolio,” Williams said. 

She noted the bigger the potential investment changes, the more the value of a CPM structure and best-of-breed implementation came to the fore. 

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest developments in Super Review! Anytime, Anywhere!

Grant Banner

From my perspective, 40- 50% of people are likely going to be deeply unhappy about how long they actually live. ...

11 months ago
Kevin Gorman

Super director remuneration ...

11 months 1 week ago
Anthony Asher

No doubt true, but most of it is still because over 45’s have been upgrading their houses with 30 year mortgages. Money ...

11 months 1 week ago

Jim Chalmers has defended changes to the Future Fund’s mandate, referring to himself as a “big supporter” of the sovereign wealth fund, amid fierce opposition from the Co...

1 day 7 hours ago

Demand from institutional investors was the main driver of growth in Australia’s responsible investment (RI) market in 2023, as the industry continued to gain momentum....

1 day 7 hours ago

In a new review of the country’s largest fund, a research house says it’s well placed to deliver attractive returns despite challenges....

1 day 8 hours ago