Summary
Alpine Hill Advisors' President Brandon Pacilio discuss the benefits of tax loss harvesting and how it can help you make the most of your investments:
- Explains that larger fixed income managers may not offer state-specific portfolios due to scalability issues.
- Suggests focusing on the secondary market for bond selection.
- Advises considering after-tax returns when choosing between municipal and corporate bonds.
- Highlights the ability to do bond swaps for tax loss harvesting.
Our President Brandon Pacilio explained Alpine Hill Advisors’ unique and client-centric approach to tax loss harvesting and bond funds in an interview with Asher Rogovy on the NAAIM Confidential Podcast.
Transcript:
Asher Rogovy
You know there’s a lot of tax-free municipal bond funds in popular areas like Manhattan or California or something like that—I’m sure that would work wonders for clients in those areas without having a dedicated bond fund.
Brandon Pacilio
Well that’s exactly right! Look at these larger fixed income managers—they have to manage massive amounts of people that scale institutional investors—they might look at certain states but not buy those certain states because there might not be enough issuance for scalability in their portfolios.
Let’s say you’re a North Carolina resident; we can curate a North Carolina portfolio for you whereas larger fixed income managers might say “look, we can’t offer a North Carolina portfolio.” They won’t be able to produce that portfolio in large quantities.
We’ll look specifically at the secondary market; people look at the primary market but there’s not enough issuance there—so they might say “I’m sorry I can’t buy North Carolina bonds.”
What’s important to note is instead of getting into either municipal bond corporate bond strategy—we’re able to say “look in your portfolio let’s look at things on a tax basis.” We’re looking at bonds weekly or daily; we’re doing those calculations—we see tax returns sometimes may be more advantageous to buy single A rated municipal bonds yielding three-and-a-half percent than after pre-tax basis—that’s equivalent to six-and-a-half percent rated corporate bonds if you’re in the top tax bracket.
We can specifically cater portfolios to meet each client’s needs on a tax basis without saying “no need to go corporate bond or go municipal bond or bond fund.” I think that’s one of the unique advantages.
Another point is with your bond fund—that might be one position you might manage—we’re able to consistently do bond swaps—so we could bank taxable losses then just go rotate into a new bond that has the same par value; par value is coupon payments based on income streams doesn’t change; all we did was bank capital loss.
I think that’s one of the things we’ve been doing over the past couple of years when you’ve had blowout interest rates—maybe paper losses in portfolios—we’ve actually been able to say “let’s bank those losses and rotate into new bonds with higher income streams.” And that’s been something that our clients have loved.
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The information provided is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status or investment horizon. You should consult your attorney or tax advisor.
No investment strategy or risk management technique can guarantee returns or eliminate risk in any market environment. All investments include a risk of loss that clients should be prepared to bear. The principal risks of Alpine Hill strategies are disclosed in the publicly available Form ADV Part 2A. Although fixed income generally present less short-term risk and volatility risk than stocks, fixed income does contain interest rate risks, the risk of issuer default, issuer credit risk, liquidity risk, and inflation risk.
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