Why I Put My Own Money Into a Tax-Aware Long/Short Strategy
After 20 years investing client capital, I've learned a simple rule: most Wall Street innovations are built to be sold, not owned.
Leveraged ETFs, SPACs, variable annuities, structured notes, non-traded REITs — clever packaging, great margins for the firms that create them, usually disappointing outcomes for investors.
This one is different in structure and approach. And I know that because I'm using it myself. In fact, I was personally the first "client" to allocate my own capital to the strategy through Bootpack before offering it to anyone else.
What Is It?
I recently allocated a meaningful portion of my own portfolio to a tax-aware long/short equity strategy. I want to explain what that means and why I believe it can be a useful tool for certain taxable investors.
The biggest destroyer of wealth in taxable portfolios isn't bad investments — it's taxes quietly compounding every year.
Let's start simple. Most investors own funds or ETFs that hold stocks they like. That's the "long" part. Long/short strategies go further — they also short stocks they believe will underperform, creating return opportunities in both directions.
For decades, this type of portfolio construction was largely limited to hedge funds and institutions.
What makes this strategy different is that the institutional investment approach is paired with a tax system designed specifically for taxable accounts — one that continuously harvests losses, manages gains, and defers taxes while the portfolio runs.
The goal is straightforward: a strategy designed to pursue attractive returns before taxes while helping reduce the tax drag that can erode long-term wealth.
Why I Moved My Own Money Here
I had a problem that many long-term investors eventually face: a pile of appreciated positions I no longer believed in, and a portfolio that had drifted away from where I wanted it to be.
Specifically, I held five U.S. ETFs plus a handful of individual stocks I'd picked up during COVID. Those single stocks had done well, but I'd lost conviction in them and the embedded capital gains made selling feel painful.
On top of that, I'd been overweight small-cap stocks from an earlier bet I wanted to unwind, but triggering those capital gains felt unnecessary.
This strategy gave me a way to use all of that — the gains, the losses, the whole messy portfolio — as fuel to transition into a more diversified core U.S. equity allocation.
Instead of triggering a large tax event, I was able to reposition into a portfolio designed to pursue stronger long-term returns while potentially reducing tax drag along the way.
It was the right tool for the situation.
Why This Manager?
I've followed this firm since 2001, when I worked alongside one of the founder's brothers at Carlyle (the brilliant Dr. Jimmy Liew). Founded by a team of PhDs out of Goldman Sachs, the firm has spent more than 25 years building research-driven investment strategies and today manages nearly $189 billion.
What drew me to this manager is their reputation for intellectual honesty and a long track record of innovation, continuously refining their approach and developing new strategies across market cycles.
But here's the most important thing to understand about this strategy: the tax benefits are only part of the story — and arguably not even the most important part.
A tax-aware strategy that doesn't generate pre-tax alpha is just a sophisticated way to lose money slightly more efficiently.
The tax engine only creates meaningful value when it sits on top of a credible investment process capable of generating returns before taxes are even considered. Manager selection here is everything.
That's the primary reason I spent considerable time studying this strategy before committing my own capital. I needed to believe independently that the underlying investment approach had a durable basis for generating returns.
This isn't tax-loss harvesting dressed up as something more. It's a serious investment strategy with a tax-aware framework built on top of a deeply researched investment process.
For a deeper look at how the strategy works, the trade-offs involved, and how it's delivered, visit the Tax-Aware Long/Short page on our website.
Who Else Is This For?
Before describing a few real-world examples, it's worth clarifying how the strategy is implemented.
Clients do not invest in a pooled fund. Instead, the strategy is implemented in separately managed accounts custodied at Charles Schwab. Clients retain full ownership of their accounts, can see every position in real time, and maintain normal liquidity. There are no lockups, gates, or opaque structures — just a professionally managed portfolio implemented inside a transparent brokerage account.
Since putting this strategy to work in my own portfolio, I've been onboarding a small group of clients — each for very different reasons.
One client holds the majority of his net worth in a single stock inherited from his grandfather. The position is deeply appreciated, and selling has never felt like a real option. This strategy is giving him a path to diversify more thoughtfully without triggering a large tax bill.
Another is a corporate executive who had accumulated more than $2.5 million in a direct indexing strategy that delivered decent tax features but middling performance. We're using this as an upgrade — a strategy designed to pursue stronger long-term returns while maintaining the tax discipline he already valued.
A third client took a different approach entirely. Rather than funding the strategy with new assets, he contributed a core group of ETFs he wanted to keep. The manager uses those as collateral to run a market-neutral overlay on top — designed to generate additional returns and potential tax benefits without disturbing his underlying holdings. He kept exactly what he had, and layered something powerful on top.
And a fourth is a private equity executive using this as his core equity allocation while deliberately accumulating capital losses — helping offset the significant gains he expects when a portfolio company sells later this year.
Four very different situations. The same powerful tool.
Who This Is Not For
This strategy isn't appropriate for every investor.
It's generally not a fit for retirement accounts, smaller portfolios, or investors who are primarily focused on minimizing short-term volatility. Because the strategy involves short selling and leverage, performance can diverge from traditional long-only equity markets over shorter periods of time.
Investors who benefit most from this approach tend to have large taxable portfolios, embedded capital gains, or complex holdings that have built up over time.
Is This Right for You?
This strategy is generally best suited for investors with taxable portfolios of meaningful size — typically $2 million or more — who have appreciated positions, complex portfolios, or both.
For investors who understand those risks and hold substantial taxable assets, the combination of return potential and tax efficiency may be compelling.
If your portfolio has gotten complicated over time, this conversation is worth having. Feel free to reach out or schedule a call.
— Matt
The client situations described above are illustrative and anonymized. They are intended to show the range of circumstances in which this strategy may be appropriate and do not represent the experiences of all clients. Individual results will vary based on each client's specific financial situation, tax circumstances, and market conditions. Nothing in this post should be construed as a guarantee of future results or tax outcomes. Investing involves risk, including the potential loss of principal. Tax-loss harvesting and other tax strategies do not guarantee a tax benefit and may have unintended tax consequences — consult your tax advisor before acting on any information contained here. Bootpack Financial Partners, LLC is a registered investment adviser in the state of Wyoming. Registration does not imply a certain level of skill or training. This post is for informational purposes only and does not constitute an offer to sell or solicitation of an offer to buy any securities or investment advisory services.