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October 8, 2021
As investors, we believe it’s not what you earn, but what you keep that matters. That’s why we’ve been focused for more than two decades on capturing the full stock market return while seeking to enhance an investor’s performance by capturing tax alpha—the added value that sound tax strategies can bring to an investment portfolio
We believe tax management is a critical portfolio management tool, but it is not the only one. Investors are increasingly focused and deserve investments that can be individually customized to do things such as align with investor values or reduce exposure to certain risks, focus on enhanced income or particular factors. In order to deliver that solution, Goldman Sachs Asset Management offers separately managed accounts that can be customized to individual needs.
The investment technique of designing highly customized, tax-efficient, value-aligned portfolios is also known as Direct Indexing. Direct Indexing strategies seek to replicate the performance of an equity index by owning the underlying stocks through a sampling process. This ownership makes it easier to customize a portfolio to address a range of important investment objectives. For example, an investor may want to align her investment with her personal values. Directly investing in individual stocks make it easier for her to pursue this and other goals.
Our portfolio management philosophy is built around several of these core considerations:
Taxes: Tax costs from realized capital gains can significantly erode wealth accumulation. With our systematic, tax-advantaged approach, we regularly harvest capital losses to offset portfolio gains seeking to reduce our clients’ tax liabilities, while also avoiding capital gain recognition. This strategy is known as “tax-loss harvesting.”
Risk Management: Our portfolios need to be managed in such a way that no unintended sacrifice is made on the total return or economic experience of a portfolio in pursuit of tax savings.
Wealth Accumulation: Through a tax-efficient, fee-efficient strategy, we strive to help investors keep more of what they earn and enhance the power of compounding over a long-term horizon.
Value Alignment: We believe in empowering our clients to align their portfolios with their personal values (e.g., environmental, social, or faith-based considerations), while still managing risk and helping clients meet their investment goals.
Analytical Transparency: Investors should have the ability to evaluate and control the risk profile of their portfolio, from tracking error, to tax costs, to factor exposures. Our systematic approach offers clients the ability to tailor their portfolio to their investment objectives.
Diversified Market Exposure: As an alternative to market cap weighted benchmarks, investors may also consider diversifying their exposure with alternatively weighted indexes that are sensitive to risk and equity valuation.
By implementing our philosophy on a platform developed over more than two decades, we are able to offer investors highly customized, tax-aware, risk-managed solutions. Our fee sensitive portfolios offer similar benchmark-aware exposure to passive investments—but with the benefit of active risk management and taxloss harvesting.
This material is provided at your request for informational purposes only. It is not an offer or solicitation to buy or sell any securities.
THIS MATERIAL DOES NOT CONSTITUTE AN OFFER OR SOLICITATION IN ANY JURISDICTION WHERE OR TO ANY PERSON TO WHOM IT WOULD BE UNAUTHORIZED OR UNLAWFUL TO DO SO.
Prospective investors should inform themselves as to any applicable legal requirements and taxation and exchange control regulations in the countries of their citizenship, residence or domicile which might be relevant.
Goldman Sachs does not provide legal, tax or accounting advice, unless explicitly agreed between you and Goldman Sachs (generally through certain services offered only to clients of Private Wealth Management). Any statement contained in this presentation concerning U.S. tax matters is not intended or written to be used and cannot be used for the purpose of avoiding penalties imposed on the relevant taxpayer. Notwithstanding anything in this document to the contrary, and except as required to enable compliance with applicable securities law, you may disclose to any person the US federal and state income tax treatment and tax structure of the transaction and all materials of any kind (including tax opinions and other tax analyses) that are provided to you relating to such tax treatment and tax structure, without Goldman Sachs imposing any limitation of any kind. Investors should be aware that a determination of the tax consequences to them should take into account their specific circumstances and that the tax law is subject to change in the future or retroactively and investors are strongly urged to consult with their own tax advisor regarding any potential strategy, investment or transaction.
Views and opinions expressed are for informational purposes only and do not constitute a recommendation by GSAM to buy, sell, or hold any security. Views and opinions are current as of the date of this presentation and may be subject to change, they should not be construed as investment advice.
Diversification does not protect an investor from market risk and does not ensure a profit.
The portfolio risk management process includes an effort to monitor and manage risk, but does not imply low risk.
There is no guarantee that objectives will be met.
The cost basis of a tax loss harvesting portfolio is driven down due to the realization of capital losses, creating a contingent tax liability. For investors who will eventually bequest their tax loss harvesting portfolio to charity or to their heirs upon death, taxes on the unrealized gains are generally avoided. However, if the tax loss harvesting portfolio is liquidated, the investor will pay taxes on the realized gains upon liquidation. Gross after-tax calculations include realized losses incurred by the portfolio but do not account for unrealized gains. If the portfolio is neither gifted nor bequeathed, the investor will pay taxes on the realized gains upon liquidation, which will affect after-tax returns.
The information and services provided on this web site are intended for persons in the US only. Non-US persons are directed to our audience selection page.
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