Systematic Tax-Loss Harvesting in Custom Core Fixed Income Portfolios

January 21, 2022
For nearly 10 years Parametric’s fixed income team has been building investment-grade corporate bond portfolios for investors in both taxable and tax-deferred accounts. Over that time we’ve embraced the importance of portfolio customization in developing our strategies. While the array of options continues to broaden with the growth of ESG investing, one of the most frequently selected customizations remains tax-loss harvesting (TLH).

Many investors may already be familiar with TLH in equity portfolios, where it can have a significant effect on after-tax performance, if done thoughtfully. And while the effect on fixed income portfolios is often less dramatic, it remains a valuable advantage over index funds for advisors whose clients seek passive fixed income exposure.

This paper illuminates the benefits of systematic, year-round TLH in bond portfolios and explores the methodology behind TLH in Custom Core Fixed Income, Parametric’s custom, passive fixed income solution.

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Thomas Luster, CFA

Managing Director, Taxable SMA Strategies

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Bernie Scozzafava, CFA

Director, Quantitative Research and Portfolio Management

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Dan Codreanu, CFA

Director, Fixed Income Portfolio Management and Quantitative Research

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