The push for after-tax investment performance reporting has gained renewed momentum, largely due to the Cooper review identifying it as a responsibility of super fund trustees to supply this information to members.

With the introduction of a new benchmark by the Association of Superannuation Funds of Australia (ASFA) and index provider FTSE, which measures the price performance of the 200 largest companies listed on the Australian Securities Exchange, and which includes the effects of franking credits, off-market buybacks and capital gains tax, the industry has no excuse for continuing its old practices, ASFA has argued.

Yet, the practicalities of implementing an after-tax regime have held many super funds and fund managers back from switching.

The case for reporting investment returns on an after-taxation basis is pretty straightforward: you tell the investors what they actually end up with. Most super fund trustees agree that failing to provide a clear insight into this take-home amount could come at the cost of a loss of interest by members, which ultimately means fewer contributions.

Pinnacle Investment Management managing director Ian Macoun welcomed the renewed focus on after-tax reporting for this reason. "The ASFA after-tax benchmarks are a good initiative. Our Aussie equities managers are all very happy to report against after-tax benchmarks," he said.

But implementing an after-tax reporting strategy means an overhaul of the current reporting system and critics question whether the rewards that can be achieved for members is worth the investment of time and resources.

"If you look across the traditional superannuation funds, all the things that you might have to deal with all these manager issues, benchmark issues, you really only have a certain amount of time and resources available and the question really is how do you divvy up those resources in a way that delivers the members the best overall outcome," Perpetual portfolio manager of diversified funds Michael Blayney said.

ASFA has argued that the new benchmark should simplify the transition to after-tax reporting because it takes away the need to create customised benchmarks by managers, but Blayney is somewhat cynical about the index.

"I think from FTSE's perspective, it is a good business strategy," Blayney said. "S&P has virtually a monopoly over Aussie equities, the MSCI has virtually a monopoly over global equities. If you are another index provider, you've got to find some way into the market," Blayney said.

"It makes sense to look at after-tax returns, [but] the key question is whether that is actually in keeping with what the investor should focus on. Our tax guys looked at different rates of turnover, different rates of tax, different levels of outperformance and, for superannuation funds, it didn't seem to make huge amounts of difference.

"It is like the fee debate in a certain way. If you get a higher tax bill because you generated higher returns, then that might actually be better," he said.

A recent report by Towers Watson also found that the benefits of after-tax strategies for super funds are relatively modest.

For passively managed Australian equities portfolios, the tax drag is negligible for super fund investors because the benefit of franking credits broadly offsets the drag from capital gains.

In actively managed portfolios, there are some gains to be made. The impact of turnover on performance is between 0.14 and 0.42 per cent, while investing in higher yielding equities could add another 0.11 per cent, Towers Watson found.

But the report concludes that overall fees and tax detract little from the alpha generated by active Australian equity managers. It also finds it is better to invest with a good active manager, even if the tax management is poor, than in a passive strategy, or a mediocre active manager with best-practice tax management.

Cooper has put after-tax reporting back on the agenda, making it a governance issue, but the demand from investors for this reporting method has not been overwhelming.

When looking at the take-up of existing after-tax products investors show a rather hesitant approach.

Continuum Capital Management, a Westpac-backed boutique fund manager, offers a separate after-tax fund to its clients. The managers feel it is necessary to split out the portfolio because the strategy affects investment decisions as well as performance measurements.

Continuum executive director Max Cappetta said investors were not yet fully embracing the after-tax approach.

"It is in a state of flux, I would say. People are dipping their toe in the water, but people are not yet willing to go the whole hog and manage their whole portfolio on a purely after-tax basis," Cappetta said. "They want managers to consider the tax position but won't measure the manager against that necessarily. It is kind of a hybrid approach at this point in time."

Continuum executive director Anthony Corr added that the focus is solely on domestic equities at the moment. However, he said super funds would need to address their entire portfolios if they want to give a true perspective on after-tax returns.

"The focus has been on Australian equities, probably because super funds have a third of their portfolio invested in Australia, and while that is probably too much in terms of a risk perspective, the tax benefits in terms of franking credits are of value to super funds," Corr said. "That said, I think there still needs to be a lot of work done on the other two-thirds of the portfolio."

Corr said this needs to be an industry-wide effort. "We can try to optimise something on one side, but I think it is a partnership that needs to be taken on between the funds as well as the investment managers on a collective basis. Not an easy concept to bring together, but just because it is difficult doesn't mean people should not try," he said.