Most financial innovations promise far more than they deliver, especially for taxable investors. Long-short direct indexing is a rare exception. When implemented correctly, it can convert routine market volatility into tax benefits while maintaining the portfolio’s market exposure. This makes it uniquely valuable for ultra-high-net-worth (UHNW) and Family Office investors facing sizable capital gains from private equity, real estate and hedge fund investments, or grappling with risks from concentrated stock positions.
This paper explains how long-short direct indexing expands the traditional direct indexing toolkit by harvesting valuable tax losses in both rising and falling markets. It outlines four practical use cases that matter to UHNW families: deploying new capital to maximize tax benefits, rejuvenating older and less productive direct indexing portfolios, unlocking tax flexibility from highly appreciated ETFs and tax-efficiently diversifying low-basis stock positions.
Our message is this: most Wall Street products add complexity but provide little value. Long-short direct indexing is complex but may offer substantial value in the right situations. It is transparent, rules-based, and built to improve after-tax outcomes. For investors with meaningful gains to mitigate, it can turn volatility into a durable advantage.
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