Investing Ideas

Beyond cap-weighted indexes: Exploring the implications of tax management on factor portfolios

In this article, the authors study the effectiveness of tax management overlay on various equity factor portfolios.

By: Satyajit Chandrashekar Mike Hagopian Jessica Stauth
Updated: 5/15/2024
Key Takeaways
  • Applying a tax management framework to smart beta or factor portfolios provides beneficial after-tax outcomes.
  • Among the factor portfolios tested, a tax management framework generally resulted in a less desirable pre-tax portfolio but is compensated for on an after-tax basis.
  • Of the portfolios tested, a Momentum factor portfolio was the strongest candidate for delivering tax alpha, while a multi-factor approach provided the strongest overall results on an after-tax risk-adjusted basis.

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Beyond cap-weighted indexes: Exploring the implications of tax management on factor portfolios

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