i3 Podcast Ep 11: Raewyn Williams

 

I was worried that a hour-long conversation on tax and implementation costs would be boring… far from it!

In this episode, I chat with Raewyn Williams, Managing Director of Research at Parametric. We explore some of the reasons why its so important to give after-tax investing the attention it deserves. Raewyn considers some of the reasons why institutions don’t do this. She has done some fascinating research into the reasons why its so hard for institutional investors to innovate.

Raewyn then busts a few myths on tax, including the tax efficiency of passive investing and the role of it in the take-up of exchange traded funds.

Overview:

6:00 Funds find after tax outcomes interesting but are slow to put money behind it.
7:20 Capital gains tax
8:00 Australian equities managers sometimes sell a stock a week before the 12 month holding period where capital gains tax outcomes are much better
12:00 How Parametric realised Australian funds pay tax
18:00 Factor investing: investors feel they have to put their neck on the line, because there is no manager to fire. Blame Culture.
20:00 The biggest problem with innovation is not ideas, but resourcing.
22:00 Disadvantages of scale is it is harder to take up new ideas, to be agile
23:00 Smaller funds should take on board the gift of being more able to take on new ideas
31:00 Passive investing is tax efficient: true or false?
37:00 Should super funds be segregating assets in the pension phase?
44:00 The only innovation in retirement has been flexibility, nothing about income streams.
45:30 ETFs, is there more institutional uptake in US because of tax?
47:30 Loss harvesting in the US through ETFs.
50:00 Centralised portfolio management, does it make sense?
52:30 CGT can’t be managed effectively at the individual manager level.
58:30 Adverse selection risk when looking for managers that share their intellectual property
1:09:00 How do you address concerns that you might use manager IP in centralised portfolio management? Centralised portfolio management is not emulation.
1:14:30 Don’t be obsessed by lowering fees. New expertise comes at a cost.

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