Australia’s share market might have gone up 100 percent over the last three years, but many investors will end up giving the Australian Tax Office more of that windfall than they should have, says Integrity Investment Management founder Paul Fiani.

Briefly famous in his previous job running Australian equities at UBS Global Asset Man­agement (UBS GAM), after he voted down Airline Partners’ takeover bid for Qantas, Fiani is now on a different crusade – to get retail investors interested in the after-tax performance of their funds managers.

“Integrity is one of the few managers out there that models every company in the Top 100, and includes the value of their franked income in our valuation,” Fiani says.

“That might lead us to pick different stocks than we otherwise would, which might lower our stated pre-tax performance, and might put us a bit lower in all the surveys everyone looks at today, but it’s a strategy which eventually lowers our clients’ tax bills and signifi­cantly increases their wealth.”

Apart from trying to maximise franking credits, Integrity has a ‘buy-and-hold’ investment strategy which attempts to ensure, whenever feasible, that clients are liable for the conces­sional rate of capital gains tax which applies after a stock has been held for 12 months.

In the case that the one-year deadline is looming and Integrity has some negative senti­ments towards the stock or wants to lock in profits, Fiani says the cost of foregoing the capital gains tax concession will be factored into the decision to sell or retain.

“A lot of those big performance numbers you see on the surveys have been achieved by guys trading in and out of the same stock, sometimes on the same day,” Fiani says.

“It looks great for now, but when the party’s over you’re paying half of it away in capital gains tax.”

Integrity, whose staff now includes five members of Fiani’s UBS GAM team, released a PDS for its Australian Share Fund in October.

Join the discussion