A multifactor approach to enhanced tax management.
A Parametric Custom Extension Separately Managed Account (SMA) is a long-short portfolio that seeks to outperform the index and increase the tax-loss harvesting opportunities compared with a long-only portfolio.
How it works
The Custom Extension SMA uses leverage to build long and short extensions that can harvest tax losses in both rising and falling markets.
Losses come from long positions when the stock price falls and from short positions when the price rises.
Maintaining a net market exposure of 100% means more money stays invested and compounds over time, expanding the potential for tax-loss harvesting.
Explore more custom SMA solutions
Why choose Parametric?
Parametric is a pioneer in direct indexing with more than three decades of experience, during which time we’ve refined our research, processes and technology. We have considerable experience in executing thousands of transitions and managing complex portfolios through multiple market cycles and high-volatility events
AUM includes overlay exposure and both discretionary and nondiscretionary assets of Parametric Portfolio Associates LLC (the “Firm”), and $8.9Bn in
assets of Parametric SAS. Please refer to the disclosures for additional information regarding the Firm.
Intended features and benefits
Potential tax benefits
Our systematic tax management approach seeks to help investors capitalize on potential tax-saving opportunities.
Leveraged harvesting More dollars invested leads to more loss-harvesting opportunities.
Consistent harvesting Taking both long and short positions results in loss-harvesting opportunities in both up and down markets.
Ongoing harvesting In a market that is appreciating over a longer horizon, the short side of the portfolio will generate ongoing loss harvesting opportunities.
What portfolios might benefit most from a Custom Extension SMA?
A cash-funded portfolio offers the greatest potential for tax loss harvesting.
We can transition an appreciated portfolio, including an existing direct indexing account, tax-effciently to reinvigorate loss harvesting. Finally, losses from a Custom Extension SMA may accelerate diversification of a concentrated stock position.
Diversification does not eliminate the risk of loss.
This investment strategy engages in short selling. A short sale involves selling a security borrowed by the investor, with the expectation that its price will decline, obligating the investor to later replace it at the current market price. Short sales carry unique risks, including potentially unlimited losses if the security’s price rises, additional costs for borrowing, and the possibility of forced closure under unfavorable conditions. Other risks include increased leverage, regulatory changes that may restrict short selling, and the need to provide collateral, which can reduce investment flexibility.
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