Green Harvest Asset Management’s Core Index Plus U.S. Equity 75% Hedged Strategy offers investors access to a managed portfolio of passive Exchange Traded Funds (ETFs) designed to provide 25% of the return of the S&P 500® Index. This strategy employs Green Harvest’s advanced SmartCapture discipline, which is an active, proprietary process designed to capture tax benefits with a focus on minimization of tracking error. This tax-beneficial investment strategy seeks to reduce equity market risk and capture tax benefits that may be used to offset capital gains which may improve after-tax performance.
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Tax Benefits Captured in the 2020 Vintage Account
Vintage account was originally invested on 1/2/20 to illustrate 2020 calendar year attributes.
Initial Anchor Holdings (New Portfolio as of 2/1/20)
|XLK||Technology Select Sector SPDR®||Long||27.5|
|XLV||Health Care Select Sector SPDR®||Long||14.6
|XLY||Consumer Discretionary Select Sector SPDR®||Long||10.8|
|XLC||Communication Services Select Sector SPDR®||Long||10.8|
|XLF||Financial Select Sector SPDR®||Long||10.1|
|XLI||Industrial Select Sector SPDR®||Long||8.0|
|XLP||Consumer Staples Select SPDR®||Long||7.0|
|XLU||Utilities Select Sector SPDR®||Long||3.1|
|XLRE||Real Estate Select SPDR®||Long||2.8|
|XLE||Energy Select Sector SPDR®||Long||2.8|
|XLB||Materials Select Sector SPDR®||Long||2.5|
|SPY||SPDR S&P 500 ETF Trust||Short||-75.0|
Pre-Tax Composite Performance (through 6/30/20)
|3 month||YTD||1 Year||3 Year|
|S&P 500 Index||20.54%||-3.08%||7.51%||10.73%|
|Benchmark (25% of index)||5.14%||-0.77%||1.88%||2.90%|
Performance quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, so you may have a gain or loss when the portfolio is liquidated. Current performance may be higher or lower than that quoted. Performance of an index is not illustrative of any particular investment and does not include the impact of advisory fees. It is not possible to invest directly in an index.
GHAM does not provide tax advice. GHAM works with outside accounting firms and outside tax counsel that provide ongoing guidance and updates on all relevant tax law. Federal, state and local tax laws are subject to change. GHAM is not responsible for providing clients updates on any changes in tax laws, rules or statutes.
Composite performance calculations based on asset weighted average of all accounts in the strategy.
Reasons to harvest capital losses, sources of capital gains and the suggestion that mutual funds distribute capital gains are for illustrative purposes only.
The availability of tax alpha is highly dependent upon the initial date and time of investment as well as market direction and security volatility during the investment period. Tax loss harvesting outcomes may vary greatly for clients who invest on different days, weeks, months and all other time periods.
Portfolio Characteristics analytics applies to assets invested in GHAM strategy and their underlying exposures, and excludes any directly held cash or money market balances. Cash balances in the margin account are also excluded from Green Harvest’s performance.
The Strategy takes “short” positions by selling an index ETF that the client portfolio does not own, which exposes the portfolio to costs and risks that are not associated with owning securities long. Certain of these costs and risks are described in the margin disclosure statement provided to you by the financial institution holding your account, and we encourage you to discuss those risks and costs with your advisor. The following disclosure discusses the risks related to Green Harvest’s investment strategy.
A short position has an opposing or “inverse” relationship to a long position on the same asset. Generally, the short index position will lose money when the overall long portfolio is rising in value, and the short position will increase in value when the long portfolio is losing money. This relationship provides the “hedging” aspect of the Strategy. Green Harvest seeks to short an index ETF that is expected to have a strong inverse relationship with the strategy benchmark. If the index ETF underlying the short position deviates from this inverse correlation to the benchmark performance, then the Strategy will not perform as desired, and you could have limited tax loss harvesting outcomes as well as low or negative portfolio returns. Although the short position is intended as a hedge against negative or low returns of the markets, the Strategy’s return may be negative. Any dividends paid by ETFs underlying the short position must be paid to the institution lending the security and thus will not generate income for your account.
Tax loss harvesting opportunities exist when the long portfolio has gains and when the short position has losses. Portfolio losses may result in margin calls from your financial institution, and when you instruct Green Harvest to sell portfolio assets in response to margin calls, such sales could generate taxable capital gains. Alternatively, you will be required to add cash to the account in response to margin calls.
Short positions can lead to more volatile performance of the underlying security. In addition, the ETFs underlying short positions may experience periods of low trading volume or reduced liquidity, which would restrict the ability to enter short positions. In these periods, Green Harvest can seek to enter short positions through other available transactions, which may have higher transaction costs. All investments are subject to liquidity risk, especially when markets are not functioning normally. If Green Harvest is unable to acquire or dispose of holdings quickly or at prices that represent perceived market value, then the Strategy will be negatively impacted. Examples of events that can lead to heightened liquidity risk include domestic and foreign economic crises, natural disasters, political instability, and regulatory changes.
All data and conclusions derived from data in this factsheet are unaudited and their reliability and accuracy is not guaranteed.
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