Ethic Inc. (“Ethic”) offers tax loss harvesting via its active tax management offering (“Active Tax”). Active Tax is an opt-in service and Ethic generally charges an additional fee to enroll an account in Active Tax. Active Tax is not applicable to all accounts and not all accounts are eligible to opt-in to Active Tax.
For accounts that have opted-in to Active Tax, Ethic will systematically and proactively monitor the account for opportunities to harvest losses, given the below described constraints and limitations. At its discretion, Ethic will sell securities with the intention of realizing a capital loss and will subsequently purchase replacement securities. The systematic monitoring of an account does not guarantee that opportunities to harvest losses will be present or that Ethic will harvest any such losses.
For Base Tax Accounts (“Base Tax”), which are eligible for but have not opted-in to Active Tax, Ethic may, at its discretion, consider the net realization of losses as one factor in determining what securities to buy and sell during such accounts’ regular trading. For Base Tax accounts, Ethic will not actively seek to trade the account with the intention of realizing losses. If such account holders prefer for Ethic to proactively and systemically monitor the account for opportunities to harvest losses, they can enroll in Active Tax, as described above.
For accounts that are not eligible for Active Tax (“No Tax”), for example because of the tax status of the account, Ethic will not consider realizing capital losses in its trading.
Note that Ethic primarily provides sub-advisory services. For accounts for which Ethic provides such sub-advisory services, advisor clients and custodians are responsible for determining that an account is eligible for Active Tax. Advisor clients are responsible for determining if Active Tax or any tax loss harvesting strategy is a suitable strategy for an end client and an end client’s account(s) at Ethic, given such client’s full set of accounts and financial circumstances.
Ethic makes no guarantee regarding the timing and amount of tax loss harvesting for any account. Ethic’s ability to harvest losses is limited by a variety of factors, including, but not limited to:
Different account configuration selections may limit the universe of securities the account could hold and therefore limit the losses available to Ethic to attempt to harvest, or could otherwise limit the effectiveness of a tax loss harvesting strategy. Such account configuration selections include, but are not limited to: tracking error budgets, sustainability preferences, tax sensitivity and gains budgets, rebalance frequency, benchmark selection, restrictions on uses of American Depository Receipts, or any other portfolio restriction or election.
Different account actions initiated by an advisor client may limit Ethic’s ability to trade or otherwise effectively harvest losses. Such account actions include, but are not limited to: the timing of wash sale windows, other pending trading requests such as requests for partial account liquidation, trading halts, ticker restrictions, the timing and type of initial funding for an account such as accounts funded with highly appreciated securities, or the timing and type of cash flows throughout the life of the account.
Market factors may impact the amount of losses available for Ethic to capture, including, but not limited to: general trends in market movements and general market volatility, or price trends and volatility in specific securities
Trading in accounts managed outside of Ethic may impact the ability to utilize tax losses harvested by Ethic. Ethic cannot take into account trading activity in accounts managed outside of Ethic when making trading decisions. Tax laws and tax rates are subject to change. Ethic’s trading functionality is also subject to change.
All Active Tax trading happens at Ethic’s discretion. Ethic may for any reason decide to limit Active Tax trading on any day or any number of days and for any account or any number of accounts at its sole discretion.
The above list is not exhaustive and additional factors may limit Ethic’s ability to harvest losses.
The election of Active Tax and Ethic’s Active Tax activity may impact the performance of an account and the cost of the account to the end client.
Additional trading in an account due to Active Tax will yield a different set of replacement securities held in the account and may result in positive or negative account performance changes.
Additional trading in an account due to Active Tax may yield additional transaction cost, depending on the pricing configuration of the account at its broker or custodian.
Ethic provides the above for informational purposes only. Nothing herein is intended to constitute tax advice and investors interested in any tax loss harvesting strategy should consult with a qualified tax professional or tax attorney.
Ethic Inc. is a Registered Investment Adviser located in New York, NY. Registration of an investment adviser does not imply any level of skill or training. Information pertaining to Ethic Inc’s registration or to obtain a copy of Ethic Inc.’s current written disclosure statement discussing Ethic Inc.’s business operations, services and fees is available on the SEC’s Investment Adviser Public Information website –www.adviserinfo.sec.gov or from Ethic Inc. upon written request at email@example.com. Information provided herein is for informational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Any subsequent, direct communication by Ethic Inc. with a prospective client shall be conducted by a representative of Ethic Inc. that is either registered or qualifies for an exemption or exclusion from registration in the state where a prospective client resides. Information contained herein may be carefully compiled from third-party sources that Ethic Inc. believes to be reliable, but Ethic Inc. cannot guarantee the accuracy of any third-party information.
Ethic Inc. does not render any legal, accounting, or tax advice. Ethic Inc. recommends all investors seek out the services of competent professionals in any of the aforementioned areas. Ethic Inc. cannot provide any assurances that any investment strategies, simulations, etc. will perform as described in our materials. ALL INVESTMENTS INVOLVE RISK, ARE NOT GUARANTEED, AND MAY LOSE VALUE. BE SURE TO FIRST CONSULT WITH A QUALIFIED FINANCIAL ADVISER AND/OR TAX PROFESSIONAL BEFORE IMPLEMENTING ANY STRATEGY.