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Are your global equity funds as tax efficient as they could be?

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Are your global equity funds as tax efficient as they could be?

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Increasing industry competition and a secular shift to passive strategies is bringing into sharp focus the value for money that asset managers bring to their clients.

 

In this environment, how can managers differentiate themselves, or generate greater returns without going outside of their strategy remit? The answer is, by eradicating unnecessary cost leakage and optimising returns.

 

In the UK, global equity allocations now represent 61 per cent of total equity allocations by domestic pension funds, according to the Pensions Protection Fund’s 2017 Purple Book. But despite the demand for these strategies, many structures that are offered by managers do not provide tax-efficient access for their tax exempt clients.

 

Such tax opaque structures lead to the dividends generated by global equity investments being subject to withholding taxes at a rate applicable to the fund, rather than a rate applicable to individual investors.

 

This means that tax exempt investors around the world may be paying unnecessary tax on dividends when investing in global equities via a tax opaque pooled fund, which is impacting returns from these strategies by as much as 20-40 basis points[1].

 

Unlocking returns

 

The Common Contractual Fund (‘CCF’) is an Irish, regulated, tax transparent fund structure. CCFs have been widely recognised by the industry as an efficient way for tax exempt investors, such as pension schemes, to utilise their tax exempt status when investing in global equity strategies.

Despite the demand for these strategies, many structures that are offered by managers do not provide tax-efficient access.

Until now however, CCFs have been underutilised by managers due to challenging set up and maintenance.
AMX wanted to find a way to make the process easier. By launching CCFs on the platform, AMX offers asset managers the benefits of a centralised process, reduced administrative burden and standardised reporting – enabling managers to maintain their focus on investing the assets, whilst still offering investors a more cost efficient structure.

 

A smarter way to manage global equity assets

 

AMX does all the heavy lifting. We get confirmation from the tax authorities in the investor’s domicile that they view the CCF as tax transparent in the form of a ruling or opinion, and also the same confirmation from the markets in which the assets are held. For investors, accessing CCFs on the AMX platform also means only filling out one set of forms for all of their global equity strategies, further saving the investor implementation time and expense.

 

With the operational burden removed, AMX gives asset managers easy access to CCFs and the opportunity to offer major savings for the end investor.

 

For more information about CCFs, please get in touch.


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