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    IT'S WHAT YOU KEEP THAT COUNTS

    Tax costs can significantly erode investment returns. Our tax-advantaged equity strategies aim to help you keep more of what you earn.

    For decades, we've been personalizing portfolios to align with individual investor goals and values. Our custom equity platform delivers tailored solutions that help investors maximize portfolio growth and build greater wealth.

     

     

    20+

    Years of Demonstrated Performance

    $133

    Billion in Assets Under Supervision1

    32,000+

    Unique Separately Managed Accounts (SMAs)

    1As of December 31, 2022
    Direct Indexing: Get More From Your Core

    PDF

    Direct Indexing: Get More From Your Core

    In this article, we’ll take a closer look at how investors who use a direct indexing strategy to get equity exposure can also achieve tailored tax management to potentially maximize overall portfolio growth.

    Our tax-advantaged strategies are designed to deliver: 

     

    Core Equity Exposure

     

    We aim to provide market-like returns through direct indexing, by purchasing a portfolio of stocks that is similar to a broad market index.

    Year-Round Tax Management

     

    Our broad range of tax management capabilities can help investors keep more of what they earn throughout the lifetime of their investment.

    Greater Wealth Over Time

     

    By keeping more invested in the market through tax deferral, investors can benefit from compounding growth to build more wealth.

     

    Source: Goldman Sachs Asset Management. This analysis is for illustrative purposes only. If any assumptions used do not prove to be true, results may vary substantially.

    * Annualized Equity Market Return is a return assumption for both the Tax-Advantaged Strategy and the Passive Strategy. The Net Annualized Equity Market Return is net of a 300 bps fee, the highest possible fee for both strategies.

    The Tax-Advantaged Strategy is represented by a direct indexing SMA that engages in tax-loss harvesting. The passive strategy is represented by a direct indexing SMA that does not engage in tax-loss harvesting. Both accounts track the same benchmark, are assumed to have the same market exposure, and have the same maximum fee of 300 bps applied to calculate net returns. The net of fee returns are calculated by adjusting each monthly gross of fee return assumption by the highest model fee applicable to any prospective client. The model fee includes all charges, transaction costs, investment management fees, custody fees, and other administrative fees.

    Risk Considerations

    Equity investments are subject to market risk, which means that the value of the securities in which it invests may go up or down in response to the prospects of individual companies, particular sectors and/or general economic conditions. Different investment styles (e.g., “growth” and “value”) tend to shift in and out of favor, and, at times, the strategy may underperform other strategies that invest in similar asset classes. The market capitalization of a company may also involve greater risks (e.g. "small" or "mid" cap companies) than those associated with larger, more established companies and may be subject to more abrupt or erratic price movements, in addition to lower liquidity. Additionally, among other things, the performance described herein does not include wash sale adjustments.  As a result, the after tax performance may be higher than in certain periods if the wash sale adjustments were made.

    Simulation assumptions: 1) Investment universe is US Large Cap equities, 2) Equity market volatility is 16% annualized, 3) Dividend yield is 2% annualized and dividends are reinvested into the portfolio, 4) Gains being offset by the losses harvested in the tax-advantaged strategy are 50% short-term and 50% long-term, 5) Federal tax rates used are 40.8% for short-term gains, 23.8% for long-term gains, and 23.8% for dividend income, 6) Portfolio is donated or bequeathed, 7) Portfolio rebalances at a monthly frequency, and 8) Portfolio has no cash flows, no gifting, no transaction costs, and no fees. Our Monte Carlo simulation generates different hypothetical future return paths for each asset, generating different paths for the market benchmark, such that the average market benchmark return and volatility characteristics align with our inputs. These results are based on simulated or hypothetical performance results that have certain inherent limitations. Unlike the results shown in an actual performance record, these results do not represent actual trading. Also, because these trades have not actually been executed, these results may have under-or over-compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated or hypothetical trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to these being shown. 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. Goldman Sachs does not provide accounting, tax, or legal advice. 9) Net realized capital losses in the portfolio are fully used to offset realized capital gains from outside of the portfolio. 10) The tax benefit from net realized losses is reinvested into the portfolio and is compounded over time.

    What We Offer

    Investors can choose from a range of capabilities to personalize their portfolios.

    Alignment to individual goals and values

    Selection of a range of market exposures

    Yield enhancement to increase income

    Tax efficient transition of existing portfolios

    Analytical tools to deliver bespoke portfolio insights

    Charitable gifting to help maximize wealth transfer

    Optimization at the individual tax lot level

    Holding period considerations

    Optimized management that balances portfolio risk and loss harvesting

    Who It's For

    Our strategies offer a flexible approach that can be tailored to an investor’s specific goals and objectives across a range of benchmarks.

    Our strategies may be appropriate for a variety of investors, including those:

     

     

      Seeking core equity exposure

     

     Aiming to align their portfolio with unique goals and values

     

     Realizing capital gains from other investments, such as appreciated stock or alternative investments

     

     Diversifying out of concentrated stocks or transitioning from other equity strategies

     

     Looking for lifetime tax management, from funding their accounts to gifting their assets

    Start the Conversation

    Connect with our team and learn more about how we can customize investor portfolios to meet individual needs and objectives. 

     
    Let's Talk

    About Our Team

    For more than two decades, our team has been helping clients build bespoke equity portfolios to align with individual goals and values. With over $130 billion in assets under supervision, we manage a wide range of strategies including tax-advantaged, factor-based, as well as environmental and socially responsible portfolios.

     

    Monali Vora, CFA

     

    Managing Director

    22 years of experience

    Monali oversees the Quantitative Equity Solutions business within Goldman Sachs Asset Management. The Quantitative Equity Solutions business designs and builds personal portfolios and investment strategies for individual investment objectives, including tax-managed, factor-based, value-aligned, and environmental and socially responsible portfolios. Monali earned a Bachelor of Mathematics from the University of Waterloo.

    Aron Kershner

     

    Managing Director

    17 years of experience

    Aron is the co-head of portfolio management for the Quantitative Equity Solutions business. Aron specializes in working with high net worth, retail and institutional clients to build customized equity solutions tailored to meet individual client objectives. Aron earned a BBA in Finance from George Washington University.

    John Sienkiewicz

     

    Managing Director

    13 years of experience

    John is the co-head of portfolio management for the Quantitative Equity Solutions business. John specializes in research relating to equity portfolios, with a focus on product strategy, portfolio construction and product development. John earned a BS in Operations Research: Financial Engineering and an MS in Operations Research from Columbia University.

    Common Questions

    What is direct indexing?

    Direct indexing aims to mimic the performance of an index by directly buying individual securities, rather than purchasing an exchange-traded fund or mutual fund. 

    What is tax drag? 

    Tax drag refers to a loss in returns on an investment or portfolio due to the long-term impact of taxes.

    How does tax drag impact a portfolio?

    Paying taxes on capital gains can significantly erode the value of a portfolio, leaving less to grow and compound over time. 

    What is the minimum investment?

    The minimum investment for this strategy is $250,000. 

    What is core equity?

    Core equity refers to an investing methodology that exposes investors to a diverse range of US companies.

    What is tax-loss harvesting?

    Tax-loss harvesting is the process of selling securities to realize capital losses and replacing them with similar securities. The realized capital losses can be used to offset capital gains, reducing taxes paid, and enhancing after-tax returns.

     

     

     

     

    Want to learn more about tax-loss harvesting strategies and how they work?

     
    Learn More

    Start the Conversation

    Connect with our team and learn more about our Custom Equity solutions.

     
    Let's Talk

    Related Resources

    • Investment Solutions: Goldman Sachs Tax-Advantaged Core Strategies

      December 30, 2022 Download Now

    • A Tax Aware Approach That Goes Beyond Taxes

      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. Read More

    Risk Considerations

    Goldman Sachs Tax-Advantaged Core Strategies (the “Strategy”) invests primarily in equity securities. The Strategy’s investments are subject to market risk, which means that the value of the securities in which it invests may go up or down in response to the prospects of individual companies, particular sectors or governments and/or general economic conditions. The Investment Adviser’s use of quantitative models to execute the investment strategy may fail to produce the intended result. Different investment styles (e.g., “quantitative”) tend to shift in and out of favor, and at times the Strategy may underperform other strategies that invest in similar asset classes. The Strategy is also subject to the risk that the pre-tax performance of the Strategy may be lower than the performance of a similar strategy that is not tax-managed. No assurance can be offered that tax-managed strategies will reduce the amount of taxable income and capital gains of the account holder. Foreign investments may be more volatile and less liquid than investments in U.S. securities and are subject to the risks of currency fluctuations and adverse economic, social or political developments. Material losses may arise as a result of human error, system and/or process failures, inadequate procedures or controls. The Strategy is not suitable for IRAs or other tax-exempt or tax-deferred accounts.

    General Disclosures

    THESE MATERIALS ARE PROVIDED SOLELY ON THE BASIS THAT THEY WILL NOT CONSTITUTE INVESTMENT ADVICE AND WILL NOT FORM A PRIMARY BASIS FOR ANY PERSON’S OR PLAN’S INVESTMENT DECISIONS, AND GOLDMAN SACHS IS NOT A FIDUCIARY WITH RESPECT TO ANY PERSON OR PLAN BY REASON OF PROVIDING THE MATERIAL OR CONTENT HEREIN. PLAN FIDUCIARIES SHOULD CONSIDER THEIR OWN CIRCUMSTANCES IN ASSESSING ANY POTENTIAL INVESTMENT COURSE OF ACTION. 

    Assets Under Supervision (AUS) includes assets under management and other client assets for which Goldman Sachs does not have full discretion. Firmwide AUS includes assets managed by Goldman Sachs Asset Management and its investment advisory affiliates. 

    Views and opinions expressed are for informational purposes only and do not constitute a recommendation by Goldman Sachs Asset Management 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. There is no guarantee that objectives will be met. 

    The following table provides a simplified example of the effect of management fees on portfolio returns. Assume a portfolio has a steady investment return, gross of fees, of 0.5% per month and total management fees of 0.05% per month of the market value of the portfolio on the last day of the month. Management fees are deducted from the market value of the portfolio on that day. There are no cash flows during the period. The table shows that, assuming all other factors remain constant, the difference increases due to the compounding effect over time. Of course, the magnitude of the difference between gross-of-fee and net-of-fee returns will depend on a variety of factors, and this example is purposely simplified. 

    Period Gross Return Net Return Differential
    1 year 6.17% 5.54% 0.63%
    2 years 12.72% 11.38% 1.34%
    10 years 81.94% 71.39% 10.55%

    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. 

    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. Past performance does not guarantee future results, which may vary. The value of investments and the income derived from investments will fluctuate and can go down as well as up. A loss of principal may occur. 

    References to indices, benchmarks or other measures of relative market performance over a specified period of time are provided for your information only and do not imply that the portfolio will achieve similar results. The index composition may not reflect the manner in which a portfolio is constructed. While the Investment Manager seeks to design a portfolio which reflects appropriate risk and return features, portfolio characteristics may deviate from those of the benchmark. Indices are unmanaged. The figures for the index reflect the reinvestment of dividends but do not reflect the deduction of any fees or expenses which would reduce returns. Investors cannot invest directly in indices. Index Benchmarks Indices are unmanaged. The figures for the index reflect the reinvestment of all income or dividends, as applicable, but do not reflect the deduction of any fees or expenses which would reduce returns. Investors cannot invest directly in indices. 

    The indices referenced herein have been selected because they are well known, easily recognized by investors, and reflect those indices that the Investment Manager believes, in part based on industry practice, provide a suitable benchmark against which to evaluate the investment or broader market described herein. The exclusion of “failed” or closed hedge funds may mean that each index overstates the performance of hedge funds generally. 

    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 not gifted nor bequeathed, the investor will pay taxes on the realized gains upon liquidation, which will affect after-tax returns. 

    This presentation is to report on the investment strategies as reported by Goldman Sachs Asset Management and is for illustrative purposes only. The information contained herein is obtained from multiple sources and believed to be reliable.

    309824-OTU-1759183

    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.

    © 2023 Goldman Sachs. All rights reserved.

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