Given the losses seen across asset classes this year, now is an opportune time for advisors to consider tax-loss harvesting.
With the end of the year approaching quickly, tax-loss harvesting is becoming a large focus among advisors and clients. Tax-loss harvesting can help lower clients’ tax bills and enhance overall investment returns by offsetting realized capital gains with realized capital losses.
The emerging markets sleeve of a portfolio is a great place to start when tax loss harvesting. For clients currently getting exposure to emerging markets through passive strategies, an active approach offers many advantages.
One benefit of active emerging markets exposure, as opposed to index strategies, is the ability for managers to capture forward-looking opportunities. There are more complexities in emerging markets that managers of active funds are equipped to understand and analyze.
Three active strategies to consider include the Matthews Emerging Markets Equity Active ETF (MEM), the Matthews Asia Innovators Active ETF (MINV), and the Matthews China Active ETF (MCH).
For investors who are unhappy with the overall shortcomings of an index ETF and want to be exposed to opportunities not only in Asia but also in countries like Brazil, MEM might be an ideal fit.
Investors who want more concentrated exposure to China, specifically, might want to consider MCH. MCH is more forward-thinking in terms of how it looks about very complex and large geography, according to John Paul Lech, portfolio manager at Matthews Asia.
Then there are investors who want a more thematic and concentrated approach around something like innovation, in which case, MINV would be a good fit.
Current investors in the ARK Innovation ETF (ARKK), or other U.S. innovation-focused strategies, may also find value in MINV, as it focuses on innovation, aiming to invest in both old and new companies in science-related and technology-related sectors while also screening for sustainable growth. The overlap here is also minimal, presenting an ideal opportunity for tax-loss harvesting.
For more news, information, and strategy, visit the Emerging Markets Channel.