Managing Tax Costs with Index-Based Separate Accounts

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

Active Index Advisors® (AIA) brings indexing to the next level, with tax-managed separate accounts that can be customized to address specific investment objectives. Founded in 2002, AIA takes an active approach to passive investing that focuses on the concerns of high net worth investors.

The evolution of indexed investing

The evolution of indexed investing chart

Suite of index replication and 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. In addition to the strategies below, customized accounts are also available.

Tax-managed SMAs include:

Accounts can also 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

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

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

Active approach to passive investing

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