In this article, we explore six quantitative environmental (E), social (S), and governance (G) strategies to provide insights into best practices for ESG portfolio construction. These strategies offer different approaches to the trade-off between desired ESG attributes and investment performance. We conclude that fully understanding the dynamics of these trade-offs will allow investors to select the strategy that best matches their ethical and financial views. (Published in the Journal of Portfolio Management, April 2019, Volume 45 Number 4.)
We report historical after-tax return and risk for three hypothetical tax-managed U.S. equity strategies based on the Russell 1000 Index. The first strategy aims to deliver index-like returns; the second is a factor tilt; and the third tracks the index while excluding oil producers. Tax alpha was highest in the index-tracking strategy, and differences in tax alpha were more pronounced, both across strategies and at different time horizons, in the estate/donation disposition than in the liquidation disposition. (Published in Investments & Wealth Monitor, May/June 2019.)
We examine the tax efficiency of an indexing strategy and six factor tilts. Between June 1995 and March 2018, average value added by tax management exceeded 1.50% per year at a 10-year horizon for all the strategies we considered. Tax-managed factor tilts that are beta 1 to the market generated average tax alpha between 1.59% and 1.89% per year, while average tax alpha for the tax-managed indexing strategy was 2.26% per year. (Published in the Financial Analysts Journal, Second Quarter 2019, Volume 75 Issue 2.)
Aperio Tax-Loss Harvesting Strategies
This presentation provides an in-depth look at tax-loss harvesting (TLH), covering topics such as portfolio construction, how TLH works at Aperio, performance assessment, and how TLH can be combined with Factor Tilts and SRI/ESG strategies.
Values-Aligned Investing: SRI/ESG for Public Equities
This presentation describes Aperio’s approach to working with advisors and clients to construct custom values-aligned strategies.