Tax-Aware Long-Short: Alpha Comes First! Don't Let the Tax Tail Wag the Dog

Tax-aware long-short has become one of the fastest-growing categories in separate account management. The rise of quants and automation has made these strategies scalable to minimums that weren't possible five years ago, and RIA adoption is accelerating. But as the space grows, a critical question is getting overlooked: Does the math actually work for your clients? Join Wayne Ferbert, Andy Pratt, and Hannah Sheldon from Burney Advisor Services as they present original research examining every 10-year return window from 2000 through 2025, comparing direct indexing, 130/30 direct indexing, and actively managed 130/30 with alpha at varying levels. Their conclusion is clear: without alpha, the fees and margin costs often consume most of the tax benefit. Alpha isn't a bonus. It's what makes the strategy worth doing.

What you'll learn:

• Why the tax harvesting part is the easy part, and why the real question advisors should be asking is whether their manager can generate enough alpha to justify the cost
• What 16 rolling 10-year windows of return data show about when 130/30 strategies outperform straight direct indexing, and when they don't
• How direct indexing portfolios ossify in rising markets, why that limits future tax alpha, and how long-short extensions are being used to solve for it
• How alpha compounds differently over time depending on whether it's generated through individual stocks or an actively managed ETF on the long side
• How to evaluate any tax-aware long-short manager before putting clients in, including what questions most advisors aren't asking