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Active Tax Management

Aperio engineers solutions designed to deliver the lower-cost advantages of indexing strategies alongside a measurable and predictable tax alpha.

Measurable Tax Alpha

Taxes are a constant—they can persistently erode returns if not managed. Any advisor to taxable
investors who ignores this effect is willing to accept potentially lower wealth for their clients. Aperio’s strategies for separately managed accounts (SMAs) are designed to generate predictable tax alpha by integrating tax-loss harvesting (TLH) strategies with equity index-tracking portfolios. Depending on the client’s tax situation, we project that loss harvesting can improve annual active return by 1.7%–2.2% (before any fee differential and without liquidation) over a 10-year period versus a comparable index fund or exchange-traded fund (ETF).*

10-Year After-Tax Wealth* $4.8 million more in after-tax wealth from TLH. *Hypothetical example, assuming a $10 million investment with a 7% annual return over 10 years without liquidation. Performance is hypothetical and is not based on an actual portfolio or account. Returns are gross of transaction costs and fees. Excludes tax effects of dividends and liquidation. Tax-loss harvesting source: Aperio Group Monte Carlo simulation.
Hypothetical example, assuming a $10 million investment with a 7% annual return over 10 years without liquidation (a final disposition of a portfolio wherein all securities are sold). For more information, see Aperio’s presentation "Aperio Tax-Loss Harvesting Strategies."

Building and Managing Tax-Efficient Portfolios

Aperio constructs portfolios in separately managed accounts composed of individual stocks that track a target benchmark. Taking advantage of the natural price movements in stocks, we continuously monitor and rebalance portfolios to recognize tax losses from securities that have declined. Realized tax losses can then offset taxable capital gains generated by other assets.

Tax Analysis for Portfolio Consolidation and Charitable Donations

More than half of our accounts start with legacy portfolios. Liquidating these portfolios spread over multiple accounts can often trigger unnecessary taxable events. Aperio can analyze and map out transition strategies to help minimize the tax impact. We can also provide an analysis to maximize the tax benefits of donating securities.

*The data shown is based on Monte Carlo simulations and reflects the following assumptions: time horizon, 10 years; individual stock volatility, 29.7%; homogenous stock correlation, 30.8%; dividend yield, 2.0%; bid-ask spread (round-trip), 0.10%; annual, per-share commissions, $0.01; and expected market return, 7.0%. More information regarding ETF comparisons and the Monte Carlo simulation can be found in Aperio’s presentation "Aperio Tax-Loss Harvesting Strategies."