Dimensional explains why tax management in separately managed accounts can extend well beyond simple tax loss harvesting. Using simulations across three decades, the article argues that a broader, tax aware portfolio design and rebalancing process may create longer lasting tax benefits, even as harvesting opportunities naturally decline over time.
Why You Should Go Beyond Tax Loss Harvesting in SMAs
Dimensional
Savina Rizova
Article
1 Pages
Key Takeaways
Tax Alpha Persistence: Aggressive tax management generated up to 1.67% annual tax alpha and maintained positive tax alpha through all 10 years studied on average.
Beyond Loss Harvesting: Targeted tax management delivered 0.30% to 0.90% tax alpha despite not systematically harvesting losses to offset external gains.
Premiums Plus Taxes: During 2001 to 2010, All Cap Core 2 earned 6.75% after tax returns versus 4.49% for All Cap Market under Aggressive tax management.
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