IB Asset Management

TAXCOV : Tax Managed Large Cap Portfolio



  • Additional attributes Large cap, Tax loss harvesting
  • Strategy Smart Beta
The Tax Managed Large Cap portfolio is a portfolio designed to systematically deliver return and risk characteristics of large stocks within the US equity market while potentially reducing the investor’s overall tax liability.  Every quarter, the portfolio is rebalanced with the objective to harvest unrealized investment losses while trying to maintain the target capitalization weighting.  Tax losses incurred in this portfolio could be potentially used by investors to offset other gains and income depending on their unique circumstances. The portfolio is implemented using a rules-based approach and offered at a relatively low cost.
The portfolio is constructed using a rules-based algorithm to determine position allocations. Initial allocations are based on capitalization weights. Stocks with unrealized investment losses are replaced with similar, correlated stocks. The portfolio tries to harvest losses without changing the desired risk and return characteristics.
The goal is to achieve a risk-return profile similar to the large stocks within the US equity market, while harvesting unrealized investment losses with a quarterly frequency. Replacement stocks are chosen based on how similar they are to the original stock on various fundamental factors like market capitalization, valuation, industry classification and others.  On average, these replacement stocks have similar expected risk and return characteristics as the stock that is being replaced but there can be no assurance that the replacement stocks will perform the same or similarly.
The portfolio will target an allocation of 150 long positions.  The initial allocation is based on capitalization weight where the security universe consists of the largest stocks within the US equity market. Every quarter, the portfolio is rebalanced with the objective to harvest unrealized investment losses while trying to maintain the target capitalization weighting.
Sell decisions will be based upon selling stocks with unrealized investment losses and replacing them with similar stocks.
Positions in stocks undergoing corporate actions may be sold or adjusted.

Actual results (since March 29, 2017) displayed. Hypothetical returns are available. Disclosures.

Hypothetical returns (before March 29, 2017) displayed. Disclosures.

Hypothetical returns (Annualized)

23.9%

1 year

1Y

10.2%

3 year

3Y

13.0%

5 year

5Y

7.1%

10 year

10Y

4.2%

Since inception

SI

Risk score

  • 22.0%

    Best quarter

  • -19.9%

    Worst quarter

    • 0.08% fee
    • $5,000 min

Hypothetical returns detail

Hypothetical returns (Annualized) from April 30, 1999 to February 28, 2017

as of February 28, 2017 Manager (net of fees ) S&P 500
1 year 23.9% 22.3%
3 year 10.2% 8.3%
5 year 13.0% 11.6%
10 year 7.1% 5.3%
Since inception 4.2% 3.5%

Hypothetical risk metrics from April 30, 1999 to February 28, 2017

as of February 28, 2017 Manager (net of fees ) S&P 500
Volatility (Annualized) 14.3% 14.8%
Sharpe ratio 0.26 0.20
Sortino ratio 0.35 0.27
Maximum drawdown -52.0% -52.6%
Value-at-risk (95%, 1 week) -6.9% -7.2%
vs. S&P 500
Information Ratio 0.29
Alpha 0.8%
Beta 0.96
R-Squared 0.97

Portfolio Manager performance

-0.5%

Last 30 days

30D

3.4%

Last 90 days

90D

-

Last 365 days

365D

Quarterly vs S&P500

Quarterly vs S&P500

Risk score

  • 3.4%

    Best quarter

  • 3.4%

    Worst quarter

    • 0.08% fee
    • $5,000 min

Portfolio Manager performance graph

All performance information on this page is based on the performance of the Portfolio Manager’s account. Client performance may differ. Client account performance is displayed on the client dashboard.

Performance Portfolio inception March 29, 2017

as of August 17, 2017 Manager (net of fees ) S&P 500
Last 30 days -0.5% -1.2%
Last 90 days 3.4% 2.0%
Last 365 Days - 11.4%
Since inception 4.7% 2.9%

Risk metrics Last 365 days

This portfolio is new to IB Asset Management and does not have 365 days worth of daily performance data required for us to calculate risk metrics.

Exposure

22.4%
18.7%
16.2%
16.1%
8.2%
  • Consumer, Non-cyclical
  • Communications
  • Financial
  • Technology
  • Industrial

Top 5 securities

5.7%
3.8%
3.3%
3.3%
2.9%
View all

Portfolio commentary

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Important Information

  1. IB Asset Management does not provide tax advice and does not represent in any manner that investing in this portfolio will result in any particular tax consequences. The tax consequences of investing in this portfolio are complex, uncertain and may be challenged by the IRS. Current and prospective clients should consult their personal tax advisers regarding the tax consequences of investing in this portfolio or any other IB Asset Management portfolio, based on their particular circumstances. IB Asset Management does not assume any responsibility for the tax consequences for any investor of any transaction. Clients and their personal tax advisers are responsible for how the transactions conducted in their accounts are reported to the IRS or any other taxing authority on the Client's personal tax returns. You can find more information on this portfolio and using a tax-loss harvesting strategy here. For additional information on claiming tax losses on your tax filings, review the IRS instructions on Schedule D (Form 1040) Capital Gains and Losses, IRS Publication 550 or speak with your tax adviser.
  2. The losses experienced by clients investing in this portfolio may be different than those indicated on this page (which correspond to the proprietary account owned by IB Asset Management) depending on the timing of a client's investment in and redemption from this portfolio. A client's ability to reduce a tax liability through investments in this portfolio depends on the client's tax and investment profile, including: (a) purchases and sales in investments of the client or the client's spouse at IB Asset Management, Interactive Brokers or elsewhere; (b) type of investment (taxable versus nontaxable); (c) holding period (short versus long); (d) the client's tax rate; (e) account size; and (f) the amount of capital gains and income a client has against which the client can apply losses harvested in this portfolio. For instance, clients in certain tax brackets may not owe capital gain taxes and certain tax-favored accounts (e.g., Roth and traditional IRAs) do not benefit from tax-loss harvesting as they are already tax-free or tax-deferred. Also, a tax-loss harvesting strategy may not benefit short-term investors.
  3. Transactions in another IB Asset Management portfolio or outside of IB Asset Management may affect whether a loss experienced in this portfolio is successfully harvested and, if so, whether that loss is usable by the client in the most efficient manner. IB Asset Management clients could write off harvested losses in this portfolio against capital gains generated in this same portfolio, other IB Asset Management portfolios, other Interactive Brokers investments, or elsewhere in their taxable accounts. Any losses are first applied to offset any investment gains and then, if any losses are left, up to $3,000 in ordinary income. Harvested tax losses not utilized during the tax period when recognized may be generally carried forward indefinitely to offset future capital gains and income, if any. But capital losses cannot be carried over after a taxpayer's death and are deductible only on the final income tax return filed on the descendent's behalf.
  4. IB Asset Management does not monitor for wash sales in client accounts and will not provide notice of wash sales to clients investing in any of its portfolios. Clients are responsible for monitoring their and their spouse's accounts, including their IB Asset Management investments, Interactive Brokers investments, and other investments, to confirm that transactions in the same or substantially similar security do not create a "wash sale," i.e., a sale at a loss and purchase of same or similar security during the 61-day wash sale period. Very generally, the wash sale rule disallows losses if the security is replaced with a substantially identical security during the wash sale period. Clients may find information on wash sales in their Interactive Brokers 1099-eligible accounts on their daily, monthly and annual Activity Statements. Clients may violate the wash sale rule and be unable to harvest certain of their tax losses if they use multiple tax-loss harvesting providers or brokers. For more information on the wash sale rule and other tax-loss harvesting-related issues, please read IRS Publication 550 and our FAQs.
  5. IB Asset Management does not represent or guarantee that the performance of the stocks selected to replace stocks that have experienced capital losses during quarterly rebalancing will be the same or similar to that of the initial holdings despite their similar expected risk and return characteristics. That performance could be better or worse than the performance of the securities that IB Asset Management sells for tax-loss harvesting purposes. IB Asset Management selects replacement stocks on the basis of how similar they are to the original stocks on several fundamental factors, such as market capitalization, current valuation, industry classification, historical return on assets, and others, leading on average to the replacement stocks having similar expected risk and return characteristics as the stock being replaced.
  6. Tax-loss harvesting can be used to defer tax liabilities, not avoid them, and therefore is less beneficial over a short investment horizon. Depending on when the client invests in the portfolio and because quarterly rebalancings seek to harvest unrealized investment losses while preserving capital weights, some of the trades made by IB Asset Management in this portfolio could actually result in clients experiencing different losses, and even net capital gains. Additionally, the act of harvesting tax losses resets the investment's cost basis and holding period, potentially resulting in higher future taxes and a negative tax alpha in the year of liquidation. The tax-loss harvesting objective of this portfolio may lead to significantly higher turnover compared to a strategy that does not try to harvest losses. This higher turnover could result in bid-ask spread expenses, higher transaction costs, and dividends being disqualified from qualified dividend treatment. IB Asset Management tries to mitigate this disadvantage with low basket trading commissions and quarterly versus more frequent rebalancings.
  7. This portfolio was launched on IB Asset Management on March 29, 2017. Return information prior to the launch date consists of hypothetical back-tested data not based on actual trading of real client funds. These hypothetical results reflect the deduction of (i.e., are net of) IB Asset Management’s advisory fee, Interactive Brokers LLC brokerage and other commissions and other expenses that a client will have to pay if he invests in this portfolio after March 29, 2017. Hypothetical back-tested results are not an indicator of the future returns a client will realize by investing in this portfolio. No IB Asset Management client actually attained these hypothetical results. For a more detailed discussion of the hypothetical nature of this return information and a discussion of the calculation methodology used, review these disclosures.
  8. There is an important distinction between the method used to calculate hypothetical and actual returns for this portfolio. Hypothetical back-tested returns before March 29, 2017 are calculated on a month-end basis with this monthly series of hypothetical returns then used as basis for calculating the various risk and return metrics presented. (Please read these disclosures for a detailed discussion of the calculation of hypothetical returns.) This is different from the returns based on actual trading of this portfolio starting on March 29, 2017 which were calculated daily, like the other portfolios on the IB Asset Management platform. Consequently, the month-end calculation of hypothetical back-tested results for this portfolio may limit their comparability to the daily calculation of actual returns.
  9. Past performance is no guarantee of future results, and all investments, including those in this portfolio, involve the risk of loss, including loss of principal and a reduction in earnings.  
  10. The actual performance of the manager account is based on the performance of an IB Asset Management proprietary account invested using this strategy and is calculated by IB Asset Management on a daily time-weighted basis, including cash, dividends and earnings distributions. The actual performance for this portfolio is presented “net of fees” and reflects the deduction of the IB Asset Management advisory fee, Interactive Brokers LLC brokerage and other commissions and expenses that a client has to pay if he invests in this portfolio after the launch date.
  11. None of the performance information displayed on this page is based on the actual performance of any IB Asset Management client account investing in this portfolio. The performance in an IB Asset Management client account invested in this portfolio may differ (i.e., be lower or higher) from the Portfolio Manager’s account performance based on any trading restrictions imposed by the client (resulting in different account holdings), time of initial investment, amount of investment, frequency and size of cash flows in and out of the client account, applicable brokerage commissions, and different corporate actions. Clients investing in this portfolio may view the actual performance of their investment in this portfolio by logging into their IB Asset Management account and reviewing their customized dashboard.
  12. All graph data is as of the end of day for the referenced period, unless otherwise specified. The investment minimum is the minimum investment required to follow a particular portfolio. The minimum amount is determined by IB Asset Management, based on the characteristics of the underlying portfolio. It should not be considered as specific investment advice for your investment situation.
  13. The hypothetical back-tested and actual performance charts are provided for informational purposes only, and should not be used as the basis for making an investment decision. We rely on mathematical formulas, computer programs, and pricing information from third-party vendors (Thomson Reuters Worldscope database) to provide these returns. Neither IB Asset Management nor any of its data or content providers shall be liable for any errors in this information or any actions taken by you in reliance upon this information.
  14. Benchmark returns displayed have been calculated by IB Asset Management using daily benchmark prices and do not include dividend income. More information here. For certain portfolios IB Asset Management uses an index as a benchmark, while for others it uses an investable exchange traded fund (ETF) as a benchmark. Index returns do not reflect the deduction of any management fees, transaction costs or expenses. Individuals cannot invest directly in an index. Investable ETF returns reflect the deduction of (i.e., are net of) management fees, transaction costs and expenses.
  15. Transaction history is available upon request. Portfolio classifications are provided by IB Asset Management, and are intended to serve as a general guide.
  16. Not all transactions listed will appear in accounts due to IB Asset Management's trading rules and individual client constraints. Eligibility of these securities is monitored periodically, and may change over time. Actual client investment holdings may vary.