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Journal Article

Taxes, Shorting, and Active Management

This paper examines the consequences of short selling by quantitative investment strategies held by individual investors in taxable accounts.

Journal Article

Multi-Period After-Tax Reporting: A Practical Solution

We propose an after-tax performance report aimed at enhancing wealth preservation and accumulation for taxable investors.

Interview

Meet the Expert: Nathan Sosner on Tax-Aware Investing

AQR Principal Nathan Sosner explains the basics of tax-aware strategies and why taxable investors should consider them.

White Paper

Understanding the Tax Efficiency of Market Neutral Equity Strategies

Tax-aware equity market neutral strategies can be inherently tax efficient. We explain why and illustrate our thinking through historical strategy simulations, as well as explore potential practical applications.

Journal Article

Partnership Allocations and Their Effects on Tax-Aware Fund Investors

We discuss certain accounting principles relevant for investors in tax-aware funds structured as limited partnerships. We present a simple stylized model that illustrates that under such accounting principles new investors do not materially suffer from unrealized gains accumulated in a tax-aware fund.

Journal Article

The Tax Benefits of Separating Alpha from Beta

We show how separating a portfolio into an active long-short portfolio and a passive index portfolio can have significant tax benefits.

Working Paper

Tax-Efficient Portfolio Transition: A Tax-Aware Relaxed-Constraint Approach to Switching Equity Managers

For a taxable investor with a highly appreciated equity portfolio, replacing the portfolio manager is likely to trigger substantial tax liabilities. We find that a tax-aware relaxed-constraint post-transition strategy significantly outperforms a traditional tax-agnostic long-only strategy in its ability to preserve and grow the investors after-tax wealth over the long term.

Working Paper

Lot Layering: The New Frontier for Hedge Fund Partnership Allocations

Despite its unavoidable deficiency caused by current regulations, we believe that lot layering aligns tax and economics more closely than any of the “aggregation” methods presently used by most hedge funds.

Journal Article

The Tax Benefits of Relaxing the Long-Only Constraint: Do They Come from Character or Deferral?

Are there tax benefits from relaxation of the long-only constraint? If so, what are the sources? To answer these questions, we decompose the total tax benefit (or liability) of a strategy into two components.

White Paper

Understanding the Tax Efficiency of Relaxed-Constraint Equity Strategies

A guide to tax-aware relaxed constraint strategies that also tries to enlighten investors on the nuances around tax benefits by comparing different tax-aware strategies with an equity beta of one.