Are the funds run in a tax-aware manner?
The funds are not tax managed but we are tax-aware. Litman Gregory tracks individual tax lots and brings tax lot selling opportunities to each sub-advisor’s attention. Tax strategies that have been employed include:
- Selling high loss lots and replacing them with new positions of equal conviction;
- Doubling up on underwater positions and then selling the original loss lots after 31 days (to avoid a wash sale);
- Selling loss lots and buying them back after 31 days (again to avoid loss lots).
In addition, we remind the stock pickers to avoid short-term capital gains if possible.
Though Litman Gregory Masters Funds is run in a tax-aware manner, there may be years when the fund has material distributions. Moreover, since the funds’ shareholder group includes non-taxable shareholder, tax strategies are employed only if the stock picker believes they won’t unduly favor one type of shareholder over another.