Definitions

 

Definitions

Active Tax Management: Aperio’s investment strategy that overlays tax-loss harvesting on top of a portfolio of equities that track an index. Taking advantage of the natural price movement in stocks, Aperio consistently monitors and systematically rebalances the portfolio to recognize tax losses from securities that have declined. Realized tax losses can offset taxable capital gains from other assets such as hedge funds, active mutual funds, private equity, company stock, or the sale of private businesses.

Alternative minimum tax (AMT): A tax calculation that adds certain tax-preference items back into adjusted gross income. AMT uses a separate set of rules to calculate taxable income after allowed deductions. Preferential deductions are added back, and then the AMT exemption is subtracted to get the AMT taxable income (AMTI). AMTI is then taxed at the current rate schedule to get tentative minimum tax (TMT). If the TMT is higher than the regular tax liability for the year, the taxpayer owes the regular tax and the amount by which the TMT exceeds the regular tax (i.e., the taxpayer pays the full TMT).

ESG/ESG databases: Data sets created by third-party social research vendors that review corporate practices on a variety of environmental, social, and governance issues.

Exchange traded funds (“ETFs”): A security that tracks an index, a commodity, or a basket of assets like an index fund, but that trades like a stock on an exchange. ETFs experience price changes throughout the day as they are bought and sold.

Factor Tilts: Aperio’s investment strategy that implements a client’s desired investment exposure or approach using a multi-factor risk model that expresses the strategy as a set of risk-factor targets. Risk factors may include tilts towards select geographies, sectors, or styles. Each factor may be overweighted, underweighted, or excluded from the portfolio entirely. 

Indexing: An investment strategy that seeks to match the performance of a particular asset class as measured by an index by investing in all or a representative subset of securities comprising the index.

Socially Responsive Indexing/ESG: Aperio’s investment strategy that allows a client to customize their portfolio to a unique social philosophy while using a passive index implementation. This strategy can incorporate both negative and positive screens, including best-in-class and environmental impact, and sets priority levels for the most important issues for a given investor.

Tax alpha: Defined as the tax reduction from short-term and long-term capital losses, less commissions, over a period's beginning balance.

Tax-loss harvesting: The process of selling securities in a portfolio at a loss to offset a client’s capital gains tax liability. Tax-loss harvesting is typically used to limit short-term realized capital gains because they are normally taxed at higher federal income tax rates than long-term capital gains.