The fund was built specifically for investors on a 15% tax rate and uses sophisticated tax strategies including turnover management, emulation, CGT optimisation and preservation of franking credits, with active portfolio management to provide exposure to a diversified portfolio of Australian equities.

Since launching in February 2011 FUM has grown by nearly 200% from $500m to $1.4b with the surge in funds stemming largely from investment by large superannuation funds.

S&P Investment Fund Services Director, Rodney Lay said S&P held Russell’s multi-manager investment team and process in “high regard” while noting Portfolio Manager, Scott Bennett and Director of After-Tax Investment Strategies, Raewyn Williams as “experienced in their respective areas of responsibility.”

Change in mandate to drive yield

The announcement of the S&P rating coincides with the first enhancement to the fund since its launch, with a change to the Perennial mandate from a value-driven to tax effective income strategy. The fund’s portfolio manager, Scott Bennett, said the change in the mandate was made to drive additional franking credits through greater exposure to higher yielding companies.

On the performance of the fund, Mr Bennett said it was still early days however Russell was confident the fund would report in line with its objective of 1.6% over the FTSE ASFA Australia 200 Superannuation Index on a post tax basis.

“Since the fund’s launch six months ago it has been able to participate in both the JB Hi Fi and BHP buy-back, which combined have added close to 60bps to the after-tax performance,” he said.

Valuable strategies in volatile environments

The after-tax gains are achieved through the combination of Russell’s proprietary emulation strategy and tax-optimisation strategies. The emulation strategy, which manages the decisions of the underlying managers centrally, results in turnover 40% lower than in a typical multi manager approach.

“Our position as the portfolio manager of the after-tax fund means we’re able to efficiently manage net trades across the aggregate portfolio to optimise the after-tax return outcomes for investors. It’s also beneficial in volatile environments, when managing every extra bit of return counts,” he said.

“The pace at which the fund has grown FUM and the new, four-star S&P rating is proof Russell is filling the gap in the market for comprehensive after-tax solutions with the after-tax fund,” Mr Bennett concluded.

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