Not Locked Up: Accessing Liquidity in Tax-Aware Portfolios

Tax-aware long-short strategies can provide liquidity without forcing full portfolio liquidation and tax realization. This means investors can access cash while preserving accumulated tax benefits.

Our research shows a $10 million investment in a 150/50 strategy could yield average cumulative withdrawals of $10.2 million over ten years. Higher leverage and tracking error, like in a 250/150 strategy, increase this capacity to $13.9 million.

The key is managing capital gain realization, allowing for meaningful cash access without sacrificing pre-tax returns or target tracking error. We will continue to monitor how these strategies perform under various withdrawal pressures.