Active Index Advisors® Direct Indexing Strategies

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) specializes in customized direct indexing portfolios. 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 clients 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 Better 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 four 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.

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

1 ETFs (exchange-traded funds) invest in a basket of securities, but trade like stocks on an exchange, experiencing price changes throughout the day as shares are bought and sold.

2 Index-based managed accounts are managed to track the performance of a specific benchmark index and hold individual securities owned directly by the investor.

3 A tax liability is the total amount of tax debt owed by an individual, corporation or other entity to a taxing authority.

4 Capital gain is a rise in the value of a capital asset (investment or real estate) that gives it a higher worth than the purchase price.

5 A portfolio tilt is an investment strategy that overweights a particular investment style.

6 Smart beta defines a set of investment strategies that emphasize the use of alternative index construction rules to traditional market capitalization-based indices.

Natixis Advisors, L.P. does not provide tax advice. Please consult with your financial advisor or tax professional.

Investing involves risk, including the risk of loss.

Sustainable investing focuses on investments in companies that relate to certain sustainable development themes and demonstrate adherence to environmental, social and governance (ESG) practices; therefore a portfolio’s universe of investments may be reduced. It may sell a security when it could be disadvantageous to do so or forgo opportunities in certain companies, industries, sectors or countries. This could have a negative impact on performance depending on whether such investments are in or out of favor.

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