1 December 2014

Old school structure: New school of investing

A tax effective investment to complement contributions to super and support longer-term investment goals

A new, tax effective investment bond that combines an old-school investment vehicle with the best of modern investment thinking has been developed by Centuria Capital – and is already being speedily adopted by independent adviser groups seeking the best outcomes for clients, especially those considering tax effective options for investing outside super. Centuria’s TaxAstute series of bonds appoints independent investment professionals to manage the bond’s underlying assets in line with their specific investment philosophy, while Centuria maintains management of the overall bond structure.

Typically, growth and earnings in the product are taxed at a maximum of 30%. Annual tax reporting is conducted by Centuria and tax is paid on behalf of investors directly from earnings. Investors pay no personal income tax on the investment during its term and, if they hold it for more than ten years, pay no tax on withdrawals

Neil Rogan, General Manager of Centuria’s Investment Bond Division, said that Centuria has spent the better part of a year working alongside boutique investment management company Implemented Portfolios to enhance the traditional insurance bond with a professionally managed multi asset portfolio using a blend of exchange traded funds (ETFs).

“The tax effectiveness of this product has strong natural appeal to investors who have already capped out their superannuation contributions.  We also expect demand from those who are investing with specific goals in mind and who may need to retain some flexibility in when they can access the money – which they can’t do with super,” said Mr Rogan. “Whether it’s paying the children’s or grandchildren’s school fees, or helping them with life choices like funding a sabbatical.”

Implemented Portfolios have a distinctive dynamic asset allocation (DAA) investment process which uses ETFs to manage risk at low cost.

“Our focus on asset allocation as the driver of investment returns means that we do not expose investors to the risk of individual security selection. It allows us to more clearly focus on matching client goals and objectives with the portfolio outcomes” explained Santi Burridge, MD of Implemented Portfolios

Mr Burridge said that working with Centuria to create the badged investment bond has brought together two key benefits for long term investors: efficient portfolio management and effective tax outcomes.

Neil Rogan described this by saying “the new release recognises the desire of independent investment managers to retain their hard-won integrity with clients and advisers”

“In the future no two Funds in the series will be the same,” he said. “Each will offer features to meet particular investor needs, in line with the individual approach of the investment manager concerned. So we can have a dynamic allocator with ETF expertise such as Implemented Portfolios, or a more conventional Aussie equities manager, or a credit specialist – it’s entirely open. What they will have in common is the enduring taxation and other benefits that will well and truly bring the insurance bond back into vogue.”