Reflections on Quantinno’s DEALS Managed Account Platform reaching $1 Billion of AUM
As Quantinno reaches $1 billion of client assets on the DEALS Managed Account Platform, we consider this an ideal time to reflect on the past few years and the evolution of Quantinno as a firm. First, we’d like to thank our incredible clients, who have thrown many challenges our way and put their trust in our firm to enhance the after-tax wealth of their clients. Second, we’re grateful for the support of our custodial partners at Fidelity, Interactive Brokers, Pershing, and Charles Schwab who have innovated alongside our team to bring these unique solutions to the marketplace.
Quantinno’s TaxEdge™ technology is the foundation upon which the firm was built. The platform centers around an advanced portfolio optimization engine that seeks to maximize after-tax wealth. Combined with Quantinno’s singular focus on serving taxable investors, we believe our firm can have an unparalleled impact on our clients’ long-term success.
Quantinno began by offering private commingled funds that targeted a positive equity market neutral investment return, along with consistent and compelling tax benefits (savings). Our belief was that an uncorrelated investment return that seeks to enhance portfolio risk-adjusted results, along with consistent and compelling tax benefits would be an attractive combination for single family offices, multi-family offices, RIAs, and other sophisticated taxable investors. Although the combination had the potential to have a significant impact on after-tax wealth, the commingled fund’s one-size-fits-all approach was a drawback. It became clear that each family had different asset allocation preferences and tax characteristics and needed solutions to match. Hedge fund investors may tend to generate short-term gains. Longer-term investors or private equity allocators may primarily face the burden of long-term gains. Real estate or fixed income investors may not generate capital gains and be more income focused. Given the cry for customization, more innovation was needed.
A managed account implementation was the natural answer, as it delivers a foundation where Quantinno can implement its unique approach and at the same time offer extensive customization options. Investors can now make choices that complement their individual needs and preferences. Customization examples come in many forms, such as the ability to choose the equity benchmark, such as US stocks, global stocks, international stocks, etc., the ability to set trading restrictions down to the individual stock level, and much more. A modest 30% by 30% long/short extension may provide consistent and compelling tax savings in excess of what can be generated by traditional long-only tax loss harvesting implementations, with a level of tracking error similar to what a long-only investor would experience. Accounts can be funded with existing securities, unlocking the ability to help with many complex client challenges that we’ll discuss further below. Supported by industry-leading clients and custodial partners, Quantinno has been a leader in offering long/short tax-loss harvesting options within accounts not implemented on prime brokerage platforms, but on the same separate account networks that RIAs, Multi-Family Offices, and Family Offices have used for years.
Consistent tax benefits can be valuable but may only get clients so far. Quantinno’s goal is to not only generate consistent and compelling tax benefits, but to offer turnkey solutions for ease of implementation that target some of the most significant portfolio management challenges that taxable clients may face. In partnership with our clients, Quantinno has refined a managed account lineup that seeks to provide tax-efficient outcomes for the following challenges:
- Reinvigorating tax benefits from long-only tax loss harvesting strategies that may have elevated levels of tracking error with minimal tax benefit generation.
- Offering noteworthy tax benefits in a consistent manner for clients building an equity allocation from cash.
- Transitioning legacy holdings or accounts into the preferred asset allocation mix of the client’s choice in a tax-efficient manner.
- Introducing tax-efficient diversification of concentrated positions, with the process fully unfolding systematically in the client’s managed account with full liquidity, transparency, and customization.
We’re grateful to have the opportunity to reflect upon a significant milestone for our firm and thank you for taking the time to read our thoughts.
If you’d like to learn more, please send us a note at IR@quantinno.com.
NOTICE TO RECIPIENTS, THIS DOCUMENT IS FOR INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE RELIED UPON AS INVESTMENT ADVICE. This document has been prepared by Quantinno and is not intended to be (and may not be relied on in any manner as) legal, tax, investment, accounting or other advice or as an offer to sell or a solicitation of an offer to buy any securities of any investment product or any investment advisory service. The information contained in this document is superseded by, and is qualified in its entirety by, such offering materials. This document may contain proprietary, trade-secret, confidential and commercially sensitive information. U.S. federal securities laws prohibit you and your organization from trading in any public security or making investment decisions about any public security on the basis of information included in these materials.
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PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS OR A GUARANTEE OF FUTURE RETURNS. The performance of any portfolio investments discussed in this document is not necessarily indicative of future performance, and you should not assume that investments in the future will be profitable or will equal the performance of past portfolio investments. Investors should consider the content of this document in conjunction with investment fund quarterly reports, financial statements and other disclosures regarding the valuations and performance of the specific investments discussed herein.
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