Taxable investors cannot afford to overlook an important fact: wealth compounds after tax. Taxes can impact a portfolio as much as returns or fees. Now more than ever, investors – many of whom are expecting taxes to rise – are thinking about after-tax returns.
Tax laws are complex and change with time. Different considerations apply for different objectives, including preserving and growing wealth, establishing a legacy for future generations and charitable giving. AQR believes that taxable investors have a better chance of meeting their goals when their asset managers take taxes into account. We call this being “tax-aware.”
New Strategies for Taxable Investors
AQR’s tax-aware approach is informed by decades of research and experience managing traditional and alternative investments. Our research has created new possibilities in the areas of:
Traditional tax loss harvesting strategies, like passive loss harvesting or direct indexing, generally realize tax benefits during early years of investment or in falling equity markets. AQR’s tax-aware equity strategies address these shortcomings, aiming to deliver larger and more persistent benefits regardless of market direction.
Alternative investments can provide valuable diversification, but they can also be tax inefficient. By combining alternative strategies with tax-aware implementation, our solutions allow investors to access these diversifying strategies in a more tax efficient way. In some cases, tax aware alternatives may even help lower an investor’s overall taxes.
Successful estate planning relies on getting investments, cost, and legal structure right. AQR helps create holistic plans for transferring more wealth, more quickly, and more reliably than traditional estate planning techniques.
AQR understands the unique challenges faced by taxable investors and partners with clients to create solutions. Working at the intersection of prudent investing, tax, and estate planning, AQR is helping a:
Single Family Office
Rejuvenate the loss harvesting potential of an appreciated equity portfolio
Diversify an appreciated single-stock position while offsetting gains from the liquidation of that position
Create a tax-efficient fund-of-funds for its High-Net-Worth clients
This list includes historical and proposed solutions for certain of AQR’s clients and prospective clients, selected on the basis of their portfolios or investments including a tax planning component. These examples are provided for informational purposes only and it is not known whether such clients or prospective clients approve or disapprove of AQR or its advisory services.
Research and Expertise
With an approach rooted in academic exploration, we are committed to ongoing education and continued innovation. We combine our experience in trading and portfolio management with knowledge of taxation to help clients achieve superior after-tax returns. We also regularly publish research and insights in our Tax-Aware Learning Center.
Read our Tax Matters Posts