Managing Tax Costs with Index-Based Separate Accounts

Watch this overview of Natixis tax management solutions using customized separate accounts to help maximize after tax returns.

Active Index Advisors® (AIA) provides direct indexing strategies that seek to produce enhanced after-tax returns. These separately managed account portfolios can be customized for tax purposes, to align with investor values and concerns, or a combination of both.

Suite of Direct Indexing Separate Account Strategies

All accounts are actively managed to optimize tax loss harvesting while providing beta exposure to an index. This type of solution can help investors mitigate tax liability3 in their portfolios, minimize capital gains,4 and plan for future taxable events. Tax-managed SMAs include:

Active indexing strategies can help address key issues facing tax-sensitive investors:

  • Maximizing after-tax return
  • Transitioning investment accounts
  • Unwinding concentrated positions
  • Estate planning
  • Selling a business

Accounts can be customized, using screens related to:

  • Specific GICS sectors, industries, or individual securities
  • Investment styles, such as value, dividend or growth tilts5
  • Environmental, social, and governance (ESG) criteria
  • Racial equity investment portfolios


A Smarter Way to Index

The managers view indexes as raw ingredients that can be adapted to each client’s goals, using a robust set of proprietary tools and techniques. From planning through execution, Active Index Advisors® can provide a customized investment experience with five types of index-based strategies.

Tax-managed equity indexing

Investors often focus on fees, but in many cases taxes have a greater impact on bottom line investment returns. Tax-managed separately managed account (SMA) strategies seek to track index performance before taxes, but outperform after taxes, using techniques not available with traditional mutual funds or ETFs.

The flexibility of the separate account structure allows the portfolio managers to use tax loss harvesting techniques to sell securities that have lost value and bank those losses. The accrued losses can then be used to offset gains in other parts of the client’s portfolio.

Factor-tilted indexing

AIA partners with leading research providers to offer packaged and custom quantitative investment solutions.

  • The Core Equity Plus strategies use a multi-factor risk model and optimizer to maximize expected excess return relative to the target index.
  • Custom Smart Beta6 and Factor Tilt strategies – such as high dividend, momentum, value or multi-factor – are designed to offer better risk-adjusted return than respective market cap weighted benchmark.

Sustainable/responsible/ESG investing

AIA’s proprietary methodology can apply environmental, social and governance (ESG) factors to create personalized indexes.

  • Positive ESG screens favor stocks that have a positive ESG rating or are best in class within their sector.
  • Negative screens exclude specific securities based on sustainability, faith, or values-based guidelines.

Racial Equity Investing

Approach is designed to track the S&P 500® reasonably closely pre-tax, but with a deliberate focus on racial equity and justice.

  • Invests in companies that are leaders in or help to promote diversity, equity and inclusion.
  • Avoids companies that cause, contribute to, exploit or profit from racial injustice.

Managed ETF portfolios

AIA offers a disciplined, systematic approach to managing ETF portfolios with ongoing monitoring and enhancement. These broad, strategically allocated portfolios offer proactive tax loss harvesting and rebalancing. Comprehensive services focus on duration management in the fixed income allocation and ongoing portfolio monitoring and enhancement.

  • Conservative, Moderate, Aggressive, and Global Equity portfolios
  • Conservative and Aggressive Income portfolios
 

Learn more about active indexing strategies