How it Works

Aperio’s Active Tax Indexing strategy employs a systematic four-step approach.

When requested, we consult closely with investors or their advisors on issues that impact the client’s unique investment, tax, and estate planning circumstances. While many accounts are created simply with new cash, we specialize in handling complex situations such as low-basis existing portfolios, concentrated holdings, complicated trust structures, and desired charitable strategies.

For examples of how Aperio has consulted on customizing portfolio implementations, see the following case studies:

Next is benchmark selection— clients can choose among most broad U.S., international, and global equity indexes. Then a separately managed account (SMA) is opened for each client at their selected third party custodian – assets in an SMA always remain under the client’s control, are fully liquid, and are never commingled with other investor funds.

Implementation builds a portfolio to track the chosen index using a multifactor model that analyzes over 9000 stocks across risk factors including sector, size, country, and volatility

As stock prices rise and fall, Aperio routinely rebalances the portfolio to recognize tax-losses – a process known as “tax-loss harvesting.” As a basic example, if Pepsi is in the target index and the stock price declines, we may sell and replace the shares with Coca-Cola, another large beverage company. The net result: the portfolio continues to hold an essentially unchanged position in the risk factors of a sizable beverage firm. Meanwhile, the rebalancing generates a taxable loss that can be used to offset a taxable gain, either in the SMA or elsewhere in the client’s economic portfolio. If no taxable gains exist today, tax-losses can be saved and used to offset future gains.

Because stock prices trade up and down throughout the year, Aperio monitors the portfolios daily for opportunities to capture tax-losses through re-balancing trades.

"Most of my investments are in equity index funds. Why pay people to gamble with your money?"

- William F. Sharpe, Nobel Laureate in Economics, 1990

Transition Analysis

Advisors face many challenges in acquiring new clients. We offer customized, transition analyses to give advisors and their clients the information they need to make tax-efficient asset migrations.

Library

  • Transition Analysis Overview  – Overview of the approach and benefits to using Aperio’s transition analysis service. Includes a case study of an advisor and a new client.  Contact Aperio to receive a custom transition analysis.