Strategies & Solutions
Tax1/Accounting Sensitive Portfolio Management
Knowing and addressing the effects of client-specific tax/accounting circumstances has been fundamental to NISA’s tax/accounting sensitive strategies since the firm’s inception in 1994. We believe the appropriate measure of performance for a taxable portfolio is the after-tax return versus the pre-tax return.
Tax/accounting sensitive strategies are customized to achieve client-specific objectives. Strategies may include loss harvesting, gain/loss restrictions, turnover management, dividend/interest management and/or considerations of state and local tax treatment. We partner with clients with realized loss constraints as well as those who desire to maximize the realization of losses.
Our approach is commonly referred to as a direct indexing solution customizable for tax/accounting sensitivities.
Portfolio losses are realized with the assumption that the client will use these losses to offset gains. To the extent the client does not have gains available to offset in the current period, the value of the tax benefit of such losses will be less than reported.
1 NISA Investment Advisors, LLC does not purport to and does not, in any fashion, provide tax, accounting, actuarial, recordkeeping, legal, broker/dealer or any related services. You should consult your advisors with respect to these areas and the material presented herein.
The risks identified below will vary based on the selected strategies for tax and accounting sensitive management. Portfolio losses are realized with the assumption that the client will use these losses to offset gains. To the extent the client does not have gains available to offset in the current period, the value of the tax benefit of such losses will be less than reported.
Tax rate changes are a risk, as Federal and State tax rates have changed numerous times over the past several years and certain changes to the tax code may not be optimal given a client’s selected strategy. In multi-manager scenarios, trades must be communicated between managers to avoid issues such as wash sales, presenting a trade communication risk. An operational accounting risk exist if the official recordkeeper of the account holds different lots than NISA’s accounting systems, leading to differing realized gain loss scenarios and potentially inefficient trading.
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This material has been prepared by NISA Investment Advisors, LLC (“NISA”). This material is subject to change without notice. This document is for information and illustrative purposes only. It is not, and should not be regarded as “investment advice” or as a “recommendation” regarding a course of action, including without limitation as those terms are used in any applicable law or regulation. This information is provided with the understanding that with respect to the material provided herein (i) NISA is not acting in a fiduciary or advisory capacity under any contract with you, or any applicable law or regulation, (ii) that you will make your own independent decision with respect to any course of action in connection herewith, as to whether such course of action is appropriate or proper based on your own judgment and your specific circumstances and objectives, (iii) that you are capable of understanding and assessing the merits of a course of action and evaluating investment risks independently, and (iv) to the extent you are acting with respect to an ERISA plan, you are deemed to represent to NISA that you qualify and shall be treated as an independent fiduciary for purposes of applicable regulation. NISA does not purport to and does not, in any fashion, provide tax, accounting, actuarial, recordkeeping, legal, broker/dealer or any related services. You should consult your advisors with respect to these areas and the material presented herein. You may not rely on the material contained herein. NISA shall not have any liability for any damages of any kind whatsoever relating to this material. No part of this document may be reproduced in any manner, in whole or in part, without the written permission of NISA except for your internal use. This material is being provided to you at no cost and any fees paid by you to NISA are solely for the provision of investment management services pursuant to a written agreement. All of the foregoing statements apply regardless of (i) whether you now currently or may in the future become a client of NISA and (ii) the terms contained in any applicable investment management agreement or similar contract between you and NISA.