Step 1: Understand Client Goals and Needs
It is important for Green Harvest Asset Management to understand the purpose and the goals of this portfolio transition. Goals may include migrating a portfolio closer to a benchmark, reducing risk from a concentrated position, providing greater income or even a transition from an equity portfolio to a multi-asset class or asset allocation strategy. Restrictions on the sale of any securities or the request of adoption of Environmental, Social and Corporate Governance (ESG) guidelines should also be discussed.
Step 2: Portfolio Benchmark Analysis
Most portfolios are the result of an investor’s or manager’s legacy point of view. That point of view may no longer be relevant or reflect current investment opportunities in the U.S. or global economies. We believe a benchmark index-based approach to investing provides the most cost- and tax-efficient method to address current client needs. Our analysis provides a comparison of the exposures of a current client portfolio versus a target benchmark index.
Step 3: Tax-Sensitive Optimization
Green Harvest’s proprietary tax-sensitive optimization tool is an important step in the transition process. It determines which securities or tax lots should be sold first to raise the maximum amount of cash while minimizing the impact of taxes.
Step 4: Strategies for Tax-Sensitive Transitions
The results of our target benchmark analysis and tax-sensitive optimization of a client portfolio are provided along with the potential tax impact of each strategy. These illustrations assume realization of gains and the potential for harvesting realized losses to offset realized gains.
This analysis illustrates multiple strategies that are designed to transition an existing client portfolio to a new target benchmark. Each client transition portfolio is optimized to provide a migration that occurs as rapidly as possible with a minimum impact on taxes.
- • Each strategy illustrates a different rate of transition.
- • Estimates of tracking error and portfolio turnover are also provided.