Active Tax Management.

We listen, we think, and we solve Together.

Why Taxes Matter?

  • Investors pay taxes.
  • Taxes can represent a large portion of the portfolio performance.
  • If not considered or managed properly, taxes can significantly impact portfolio growth.

V-Square's Tax Management Approach

Portfolio managers generally look to solve the investment equation that minimizes the tracking error, the turnover, and the tax bill (the 3T triangle charted below).

V-Square thoughtfully approaches it as an optimization problem as there is a point where the successful decrease of one item in consideration becomes at the expense of the other two items.

We design tax-aware strategies that

  • Allow investors to balance taxes, risk-adjusted returns, and transaction costs on a continuous basis
  • Enable investors to consider taxes during the portfolio construction process and at the same time keep their portfolios aligned with main objectives.

Risk management is embedded at every step of the process, ensuring adequate and intended exposures to the various risk factors, including ESG risk factors.

Why Choose V-Square Tax-Aware Strategies?

A Client-Centric Approach

  • Active tax management helps investors improve total return.
  • We start with embedded research and intentionality. Investors are involved in our disciplined iterative process to align desired investment objectives within a rigorous risk-controlled framework.
  • We enable investors to pursue their investment objective while considering risk, ESG investment goals, and taxes during the portfolio construction process and future necessary portfolio rebalancing.

Potential Benefits

  • Defer income taxes
  • Improve after-tax total return
  • Tax savings
  • Rebalanced portfolios to meet your objectives.

Tax Efficiency Program - Multiple Actionable Levels

Thoughtful setup at custodian's

Choice of cost basis method High Cost (HICO)

Know Your Tax Lot (KYTL) - Track securities by tax lots and request reports from the custodian when applicable to make strategic decisions. Specific tax lots could be selected in case of a sell.

Tax loss harvesting

We intentionally sell securities at a loss to turn unrealized losses into realized losses while replacing them with corresponding securities of similar risk return profile and characteristics, while complying with Internal Revenue Services (IRS) rules on wash sales and the tax treatment of gains and losses.

Capital losses can be used to offset capital gains, ordinary income, present and future.

Design strategies with tax efficiency in mind

Low turnover - Control and limit the turnover

Smart weighting - Preference for market cap weighting or modified market cap weighting; equal-weighting at the other end of the spectrum is the least tax-efficient methodology.

Mind the holding period - Favor long-term capital gains over short-term capital gains (20% tax rate vs. 37%)

Claim tax refunds

Including dividend withholding taxes (WHT) on foreign securities when applicable and appropriate. In case of overpayment, tax treaties can be leveraged to recoup part of the withheld tax when the dividends are paid by foreign companies to US investors. A cost/benefit analysis is often necessary as this could be a significant undertaking.

Tax Efficiency Program

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