AQR tax-aware long/short surges, plus a few memes

If Trump eliminates capital gains tax (or capital gains 🤨), I may have to re-brand as Tariff Alpha Insider.

AQR tax-aware long/short just jumped to $21.7 billion

Up from $13.2 billion at the end of last year.

Source: AQR. From their website… All figures are approximate as of 3/31/2025; AUM includes assets managed by AQR and its advisory affiliates. 1. The ~$21.7 billion represents assets invested by our clients (as compared to Regulatory Assets Under Management reported in the Form ADV, which includes the gross market value of all long and short positions in a long-short portfolio). 2. The ~$21.7 billion represents assets invested by our clients in long/short tax-aware private commingled vehicles and separately managed accounts. We also manage ~$16.5 billion in tax aware investments in mutual funds and long-only strategies in separately managed accounts.

Get up to speed on tax-aware long/short and why it’s grabbing everyone’s attention.

Ongoing investigation: How to get the camel through the eye of the needle?

One wrinkle with tax-aware long/short is that an estate must settle all debts, so if death is approaching, investors might think they need to unwind the shorts and margin. I’ve been referring to this (in my mind until now) as the camel-through-the-eye-of-a-needle-problem (Luke 18:25).

But we have a cheat code: Estate planning.

Tax planners tell me that having tax-aware long/short exposure in a living trust with specific powers to hold shorts and a margin loan can keep the extensions intact. No unwinding necessary.

Assets held in a revocable living trust are included in the grantor's estate for tax purposes. They are typically eligible for a step-up in cost basis at death and there’s only minimal administrative cost to set it up.

Upon death, the trust becomes irrevocable, temporarily locking additional tax losses inside, but once the trust terminates, the entire book may transfer to beneficiaries.

The point is that the margin and shorts keep working for investors.

There are other solutions, too. Each deserves thoughtful consideration and certainly more analysis than an end-of-week meme email affords, so I’ll table the end-of-life discussion for now. But it is material and coming.

Trump eliminated capital gains

This joke was popular for 5 minutes, then everyone remembered that money is serious.

If Trump eliminates capital gains tax (or capital gains 🤨), I may have to re-brand as Tariff Alpha Insider.

Opportunity Zone deferral is dead

Many gains were deferred, but now they’re coming due.

Obviously, accrued losses from a tax-aware long/short strategy (mentioned above and in the article) could help defray the upcoming tax bill.

Article by Lincoln Fleming (BlackRock) writing in The Tax Adviser.

I don’t care what the chart says. The meme is good

Josh nailed it

I was on

Dave Nadig

’s podcast

Watch the full podcast here.

Me, looking very mischievous while talking about ETF return of capital

I wrote a book about seeding an ETF in-kind

70 pages. full color. Jokes and guidelines advisers should keep in mind if they’re considering a 351 conversion.

Feeling inspired, I resolve to print hip tax tees soon

But seriously, I'm stealing this branding idea. Wacky tax tees are on the way. This is too good.

TGIF.