As an example, let’s look at ‘Joe’. Joe earns over $180,000 annually and is therefore on a 39% marginal tax rate. Joe wants to invest $100,000 in a passive fund, investing in global equities and hedged to the New Zealand dollar.

Joe narrows his research to the following three funds in the table below that all invest into global shares with Vanguard as the underlying manager.

Assuming an annual gross return from the underlying ETF of 9% per annum (p.a.), which includes 2% in annual dividends, we can calculate what Joe’s portfolio can look like in 10 years’ time. The table below compares the after-fees-and-tax returns of the three funds…

The table above shows the Foundation Series Hedged Total World Fund generated a better after-fees-and-tax return by around $6,000 at the end of the ten-year investment period. A significant amount of this value can be attributed to the tax-efficiency of the PIE structure over offshore funds like Australian Unit Trusts, along with the compounding impact of annual management fee savings.

The example we have provided is for illustrative purposes only, to highlight the impact that fees and tax can have on returns. Note your actual outcomes may be different, for example, if an investor was on a marginal tax rate or PIR less than 28%, that investor may experience less of an after-fees-and-tax advantage. Investors should always take into consideration their own personal circumstances when making investment decisions and should seek personalised advice from qualified advisers.