Investors generally aim to see their investments grow and preserve their wealth over the long term. However, taxes can significantly impact investment returns and delay achieving your goals. For over 20 years, we have been helping clients proactively minimize their taxes and keep more of what they earn by utilizing our Tax-Managed Equity (TME) strategy.
What Is TME?
TME is a customizable strategy designed to provide index-like equity returns while minimizing the tax drag through active tax management. Unlike traditional index funds and exchange-traded funds, TME enables you to hold individual securities in a separately managed account, giving you the opportunity to personalize your portfolio and actively manage your tax burden.
How Our Strategy Works
We begin by considering your unique objectives, including any specific customizations, to construct a diversified portfolio designed to track the chosen equity index. We then combine our technology-driven tax optimization process and our extensive experience to actively and opportunistically realize capital gains and/or losses. TME portfolios are continuously monitored and rebalanced to capitalize on stock price movements, harvesting losses from securities that have declined while maintaining or improving the portfolio’s overall risk profile versus its benchmark index. Realized tax losses can then be used to strategically offset gains within the portfolio or elsewhere in your asset allocation. Additionally, we work hand-in-hand with you to understand your goals and keep you informed about how we’re enhancing the estimated after-tax returns on your assets.
Whether you are interested in funding your portfolio with cash, transitioning an existing portfolio, or diversifying concentrated stock holdings, our experienced TME specialists consider tax implications to help you retain more of your wealth.
Tax-loss harvesting is the timely sale of securities at a loss to offset capital gains tax owed from selling profitable assets. This strategy is designed to limit short-term capital gains and preserve the value of your portfolio while reducing taxes. See our related article Unlocking Wealth: Keep More of What You Earn to learn more.
Delivering Reliable After-Tax Results
Our customized approach to tax management has helped our clients maximize their after-tax returns while providing consistent market exposure. Our methods have worked throughout every market environment. In fact, our TME strategy can take advantage of a potentially greater number of tax-loss harvesting opportunities during periods of volatility. These losses can be used to offset gains across your other investments in the current tax year or can be carried forward to offset gains in the future.
We consistently deliver higher estimated after-tax annualized returns than the benchmark, which can positively impact portfolio growth over the long term. Our S&P 500 TME strategy delivered an annualized after-tax alpha* of 0.6% per annum over the 10 years through December 31, 2023. Said differently, the hypothetical $10 million investment portfolio would be worth $1.7 million more at the end of a ten-year period due to the tax alpha generated, than the same portfolio without tax management.
*Estimated after-tax alpha is defined as the difference between post-tax performance of our TME S&P 500 composite returns and the benchmark.
Take Advantage of the TME Edge
As America’s oldest bank, we’ve been helping clients grow their wealth and secure it for more than 240 years. We understand the importance of keeping more of what you earn, and the negative impact taxes can have over time. Our TME industry-leading solutions are available to help you save on taxes, compound your wealth and power your goals.
This material is provided for illustrative/educational purposes only. This material is not intended to constitute legal, tax, investment or financial advice. Effort has been made to ensure that the material presented herein is accurate at the time of publication. However, this material is not intended to be a full and exhaustive explanation of the law in any area or of all of the tax, investment or financial options available. The information discussed herein may not be applicable to or appropriate for every investor and should be used only after consultation with professionals who have reviewed your specific situation.
The Bank of New York Mellon, DIFC Branch (the “Authorized Firm”) is communicating these materials on behalf of The Bank of New York Mellon. The Bank of New York Mellon is a wholly owned subsidiary of The Bank of New York Mellon Corporation. This material is intended for Professional Clients only and no other person should act upon it. The Authorized Firm is regulated by the Dubai Financial Services Authority and is located at Dubai International Financial Centre, The Exchange Building 5 North, Level 6, Room 601, P.O. Box 506723, Dubai, UAE.
The Bank of New York Mellon is supervised and regulated by the New York State Department of Financial Services and the Federal Reserve and authorized by the Prudential Regulation Authority. The Bank of New York Mellon London Branch is subject to regulation by the Financial Conduct Authority and limited regulation by the Prudential Regulation Authority. Details about the extent of our regulation by the Prudential Regulation Authority are available from us on request. The Bank of New York Mellon is incorporated with limited liability in the State of New York, USA. Head Office: 240 Greenwich Street, New York, NY, 10286, USA.
In the U.K. a number of the services associated with BNY Wealth’s Family Office Services– International are provided through The Bank of New York Mellon, London Branch, One Canada Square, London, E14 5AL. The London Branch is registered in England and Wales with FC No. 005522 and BR000818.
Investment management services are offered through BNY Mellon Investment Management EMEA Limited, BNY Mellon Centre, One Canada Square, London E14 5AL, which is registered in England No. 1118580 and is authorized and regulated by the Financial Conduct Authority. Offshore trust and administration services are through BNY Trust Company (Cayman) Ltd.
This document is issued in the U.K. by The Bank of New York Mellon. In the United States the information provided within this document is for use by professional investors.
This material is a financial promotion in the UK and EMEA. This material, and the statements contained herein, are not an offer or solicitation to buy or sell any products (including financial products) or services or to participate in any particular strategy mentioned and should not be construed as such.
BNY Mellon Fund Services (Ireland) Limited is regulated by the Central Bank of Ireland BNY Mellon Investment Servicing (International) Limited is regulated by the Central Bank of Ireland.
Trademarks and logos belong to their respective owners.
BNY Wealth conducts business through various operating subsidiaries of The Bank of New York Mellon Corporation. BNY and Bank of New York Mellon are corporate names of The Bank of New York Mellon Corporation and may be used to reference the corporation as a whole and/or its various subsidiaries generally.
©2024 The Bank of New York Mellon. All rights reserved. WI-611865-2024-09-25
