US-based Parametric is a majority-owned subsidiary of Eaton Vance that specialises in efficient after-tax portfolio implementation.
According to Parametric Australasia chief executive Chris Briant, tax – not management fees – is the biggest cost for superannuation funds in Australia.
But because management fees are disclosed, they have been a major focus of the Financial System Inquiry – whereas hidden costs like tax efficiency, brokerage efficiency and foreign exchange efficiency have slipped off the radar.
Parametric Australasia director of research and after-tax solutions Raewyn Williams said the FSI (understandably) wanted to start with what is easily measurable.
"My view is [the FSI] felt those undisclosed costs were starting to be dealt with through ASIC’s push for better disclosure and rules," Ms Williams said.
"I think it’s a matter of what’s measured gets managed," added Mr Briant.
But regardless of what David Murray thinks, superannuation trustees won't be able to ignore undisclosed after-tax costs for long.
As of 1 July 2013 trustees have had a legal obligation under the amended Superannuation Industry (Supervision) Act to focus on investment returns net of fees, costs and taxes.
And trustees can't rely on the funds management industry to start paying attention to after-tax costs anytime soon, according to Ms Williams.
"There is a bit of change resistance among the investment management community," she said.
"[Fund managers] have business models and scale in their products that work for them, they’re making a pretty good living out of things just the way that they are," Ms Williams said.
"We’re not going to see a lot of fund managers go out of their way to really push for things like this," she said.
Instead, says Mr Briant, it has to be demanded by trustees.
It goes back to the Jeremy Cooper's 2009 of the superannuation system, Ms Williams said.
"[Mr Cooper] was critical of the superannuation funds and trustees for being pushed around a bit by the managers," she said.
"The panel's point was: [trustees] aren't acting like the asset owners. [It was] challenging [trustees] to stand up like the really big asset owners they are," Ms Williams said.
