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Lumida's Tax Shield
Keep the Upside without the Tax
An ideal solution for clients with:
- Significant expected capital gains
- Founders expecting a liquidity event
- Concentrated stock, crypto or property exposure at low basis
Seek to Eliminate Capital Gains
Lumida's strategy is designed to deliver the return on a US equity benchmark, plus a factor return while delivering substantial tax loss harvests. These tax loss harvests can be accumulated into carry loss forwards that then offset capital gains.
The Separately Managed Account (SMA) is custodied at Fidelity. The SMA approach allows you to maintain daily control, liquidity and transparency.
This approach focuses on realizing tax losses to offset capital gains, allowing investors to retain market exposure and defer taxes effectively. An ideal solution for managing concentrated positions or new liquidity.
Lumida's Tax Shield SMA's use a quantitative approach to systematically identify loss-harvesting opportunities while holding long positions in stocks expected to outperform and shorting those likely to underperform.
The Year 1 benefits of the tax strategy are significant. Investors contributing $10 MM to the strategy can expect to generate a return comparable to the major US indices and generate tax loss harvests that are roughly ~40% of the initial principal.
This strategy provides equity returns, a factor return, and tax carry loss forwards so you can compound your wealth while creating a tax shield.
The Separately Managed Account (SMA) is custodied at Fidelity. The SMA approach allows you to maintain daily control, liquidity and transparency.
This approach focuses on realizing tax losses to offset capital gains, allowing investors to retain market exposure and defer taxes effectively. An ideal solution for managing concentrated positions or new liquidity.
Lumida's Tax Shield SMA's use a quantitative approach to systematically identify loss-harvesting opportunities while holding long positions in stocks expected to outperform and shorting those likely to underperform.
The Year 1 benefits of the tax strategy are significant. Investors contributing $10 MM to the strategy can expect to generate a return comparable to the major US indices and generate tax loss harvests that are roughly ~40% of the initial principal.
This strategy provides equity returns, a factor return, and tax carry loss forwards so you can compound your wealth while creating a tax shield.
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Lumida's Tax Shield: Keep the Upside without the Tax
See how our strategy can help you achieve your financial goals while minimizing taxes. Download the writeup to find out more.
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Past Cumulative Performance
Frequently Asked Questions
How much in tax losses can be generated with an initial principal of $10 million?
Based on historical performance and market simulations, the strategy has shown the potential to generate up to $50 million in cumulative net capital losses over a 10-year period, depending on market conditions and portfolio dynamics.
What will the strategy own?
The strategy is benchmarked against indices like the Russell 3000 and MSCI World, offering broad market exposure to U.S. or global equities, while actively managing long and short positions.
How many positions will the strategy hold?
Typically, Lumida's Tax Shield SMAs hold hundreds of positions across a wide range of sectors and market capitalizations. This high level of diversification helps balance risk while maximizing tax loss harvesting opportunities.
How does the strategy work?
The strategy leverages a quantitative factor model, a sophisticated data-driven approach that evaluates stocks based on attributes like value, quality, momentum, and sentiment. These factors are combined to build a portfolio that seeks to outperform traditional long-only strategies while generating consistent tax benefits.
Why is shorting necessary and how does it enable tax loss harvesting?
Shorting allows us to benefit from declining stocks, creating additional opportunities to realize tax losses. This approach not only enhances potential tax savings but also provides an extra source of return by capitalizing on overvalued stocks and market inefficiencies.