CLS Investments Debuts Five New Tax-Managed Portfolio Strategies

CLS Investments has announced the launch of five new direct indexed, tax-managed strategies to be made available on the TAMP platform offered by FTJ FundChoice, an open architecture TAMP based in Cincinnati. The strategies, which are a response to growing client and investor demand for tax-efficient investment options, use a quantitative rules-based approach that aims to track market-cap weighted U.S. indices with the key benefit of tax-loss harvesting to off-set capital gains.

“We’re excited to launch these new strategies for FTJ FundChoice clients looking to gain access to a level of customization and tax management that was once only available to institutional investors,” says Shana Sissel, CAIA, Portfolio Manager at CLS. “We think this is very powerful – each client, depending on when they fund the account, will have different opportunities to replicate the index and tax-loss harvest and we’re taking that into account on an individual level.”

Over the last couple of years, direct indexing has grown in popularity among financial advisors and investors, primarily because of the additional tax alpha it can provide. When advisors utilize direct-indexing models, they can capitalize on tax loss harvesting opportunities to offset clients’ capital gains elsewhere.

CLS will be optimizing these investor accounts on a daily basis utilizing technology from sister company Orion, creating a unique basket of securities that most closely replicates the index at the time of investment. By utilizing this technology, CLS will be able to harvest tax losses at an individual level—rather than a model level. Being able to harvest losses for individual securities is important because clients fund accounts at different times, and tax harvesting opportunities vary depending on each security’s cost basis.

Three of the strategies provide exposure to a large basket of individual stocks within their respective indices. The portfolios include a built-in portfolio reallocation framework:

  • CLS S&P 500 Market Beta Portfolio
  • CLS US Large Cap Market Beta Portfolio
  • CLS US Small Cap Market Beta Portfolio

The other two rules-based strategies provide tax-efficient portfolios with a more active approach based on behavioral factors:

  • CLS US High Dividend Yield Tax Managed
  • CLS US Quality Value Target Tax Managed

Although these five new portfolio options will be available first to only users of the FTJ FundChoice platform, CLS’s sister company, the investment manager has plans to broaden distribution in the future and continue allowing advisors to provide full transparency into their clients’ exact holdings—enabling them to differentiate their services.

“We’ve looked to CLS for investment thought leadership and solid investment strategies as a valued strategist on our TAMP platform since 2011,” says Dean Cook, CEO of FTJ FundChoice. “Now, providing access to additional CLS strategies that address the growing investor interest in a tax-aware investment approach, helps us work toward our goal to consistently support the evolving needs of our clients.”

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