Long/Short: Avis Short Squeeze (Pt. 1)
Risk and tax
Discounts for advisers, just reply to this email.
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Following the conference, we’re going to the Mariners game against the Diamondbacks. You need a ticket to get in.
A friend pinged me early Wednesday last week, saying that he’d noticed an Avis short position was creating a lot of damage in a tax-aware long/short portfolio.
Tax-aware long/short strategies have dominated the discussion in tax management for the last year or so. Assets are well above $100 billion now, and it seems like everyone is adding it to their practice (or at least trying).
Getting up to speed on tax-aware long/short? Start here.
Since Fidelity announced in December that it would pause new long/short account openings and later extended the pause, and after that said it would dramatically increase financing rates for many intermediaries on its platform, only to be followed by Schwab late last week announcing a different flavor of restrictions (but restrictions, nonetheless), advisers are learning how difficult it is for custodian/brokers to prudently scale these strategies.
Bloomberg quoted me on the matter…
Amidst all that, my dad called me.
My dad doesn’t care about the private wealth industry or most of what I write about. He follows the markets for entertainment and for some light day trading.
He knew all about the Avis situation from Fox Business News. This was a big story, he assured me.
There are some interesting implications for long/short strategies, but first, how did we get here? How can we enhance manager diligence? And does it even matter long-term?
