Index / ETFs — March 24, 2021

Generating Tax Alpha with Optimized Index Tracking

Active tax management targets higher post-tax portfolio returns by achieving pre-tax investment goals with lower tax costs. In this paper, we investigate the benefit of active tax management for investment strategies tracking broad cap-weighted equity market indices. Our simulations with historical market data show that tax loss harvesting with the Axioma Portfolio Optimizer can deliver substantial tax savings at low or moderate tracking error levels.

Author

Sercan Yıldız, PhD

Research, Manager