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Parametric Tax Management

Preserving gains, avoiding drains

How big an issue is tax?
For many high-net-worth investors, taxes can represent a larger drag on returns than fees or trading costs—and the alpha most managers generate isn’t large enough to cover their clients’ taxes. As a result, taxes have a major impact on the long-term growth of a portfolio. It’s a challenge that requires continuous, thoughtful management.


Make taxes less taxing
Parametric has incorporated tax management into our clients’ portfolios since 1992. Since then—and in all market environments—we’ve helped clients reduce tax exposure while preserving market exposures. We were also among the first to provide after-tax reporting, and we update after-tax performance on a quarterly basis, providing you with key performance data points you can use with your clients.

Our solutions have delivered consistent pretax returns and seek an additional 1–2% in annualized after-tax excess returns

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*Source: Parametric. For illustration purposes only. Performance is presented for the Parametric Custom Core US Large Cap 2007 Vintage Composite, which consists of accounts that completed their first full month of activity in 2007; the composite’s inception date is 12/31/2006. The composite consists of fully discretionary accounts incepted in cash that are free of unique investment guidelines or restrictions and have not changed their benchmark. The composite was selected for presentation because it is the youngest vintage composite with 10 full years of performance. It was not selected based on its performance. The returns are presented net of advisory fees (35 bps) and brokerage commissions. Performance reflects the reinvestment of dividends and other earnings. Benchmark after-tax returns are simulated for each client portfolio using client-specific after-tax benchmark portfolios. Performance of the after-tax benchmark is simulated using the same inception date, cash flows, cost basis, and tax rates as the client portfolio. The after-tax benchmark’s capital gain realization rate is based on the average turnover rate of the pretax benchmark and ending gain or loss of the after-tax benchmark for each period. The dividend income is estimated using the pretax benchmark index’s dividend return during the period. After-tax benchmark returns reflect the deduction of taxes but do not include any other fees or expenses. After-tax benchmark returns are hypothetical, do not reflect actual trading, and may not be relied on for investment decisions. The index is provided for comparison purposes. It is not possible to invest directly in an index. Past performance is not indicative of future results. All investments are subject to the risk of loss.

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Tax Alpha Simulator

Sign in or register to use our Tax Alpha Simulator to evaluate market variables’ impact on after-tax returns

More than just loss harvesting

Tax-loss harvesting—selling a basket of securities at a loss and simultaneously replacing it with a different basket of
securities—helps clients reduce their tax risk while maintaining their market exposure. It’s an important tax-management
tool. But it’s not the only one, and Parametric doesn’t stop there. Our tax-management solutions also include:

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Tax-efficient transitions. Using proprietary tools to help investors balance the capital gains they’re willing to realize against an acceptable percentage of tracking error to the desired benchmark exposure.

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Gain-realization deferral. Evaluating which securities to sell now and which to hold on to, with the expectation of future loss harvesting at the opportune time.

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Holding-period management. Determining the client’s optimum time to hold a security, with an eye toward differing tax rates for short- and long-term gains.

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Yield consideration. Advising on treatment of dividend income, since most dividends can qualify for a lower tax rate if the security is held longer than the minimum threshold.

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Tax-lot consideration. Identifying ideal tax lots to trade—particularly if investors need to generate cash flow from their portfolio.

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Wash-sale avoidance. Helping investors navigate the IRS’s rules on wash sales (repurchasing a security within 30 days of its sale) so they don’t miss out on loss opportunities.

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Charitable gifting. Working with investors to select highly appreciated stocks to gift to a tax-exempt charitable organization, donor-advised fund, or family members in lower tax brackets.


Tax-efficient transitions

More market exposure, less tax exposure

Investors seeking broader exposure via passive investments often run into a dilemma when transitioning assets: How to do it without incurring a significant tax hit from the sale of appreciated securities in the original portfolio?


Parametric offers advisors an easy-to-understand transition analysis you can use with your clients. Each scenario details the trade-offs between tracking error and tax from realized gains so you can have a meaningful discussion with your client about how to best navigate any potential transition. Ready to get started?


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Why Parametric?

Assets Under Management icon

65B+ in tax-managed customized equity portfolio AUM*

 

Dedicated teams

Six dedicated regional teams


* As of 9/30/2018

Parametric 25 years of experience

25 years of tax-management experience


Custom Core™ consists of Tax-Managed and Non Tax-Managed Strategies. Tax-Managed Custom Core™ and Centralized Portfolio Management strategies are offered by Parametric Custom Tax-Managed & Centralized Portfolio Management. Non-Tax Managed Custom Core™ are offered by Parametric Investment & Overlay Strategies. Parametric is divided into two segments: Parametric Investment & Overlay Strategies and Parametric Custom Tax-Managed & Centralized Portfolio Management. For compliance with Global Investment Performance Standards (GIPS®), the Firm is defined and held out to the public as Parametric Investment & Overlay Strategies. For additional information please visit the Disclosure Page.


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