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Working Paper

Are Completion Portfolios Effective for Managing Concentrated Stock Risk?

May 14, 2025 - Stanley Krasner Joseph Liberman Nathan Sosner Marcus Stevens

This paper investigates the most effective ways to manage the risk of concentrated stock positions.

Working Paper

A Brief Guide to the Mathematics and Taxation of Charitable Remainder Unitrusts

March 18, 2025 - Nathan Sosner Catherine Chen Roxana Steblea-Lora

We provide a practical guide for financial planners and wealth management professionals on charitable remainder unitrusts (CRUTs).

Working Paper

Combining Charitable Remainder Unitrusts and Tax-Aware Strategies to Diversify Low-Basis Stock

March 18, 2025 - Joseph Liberman Nathan Sosner Jonathan Maron

We show how combining charitable remainder unitrusts (CRUTs) with tax-aware strategies can help investors diversify low-basis stock and enhance after-tax wealth accumulation. Our findings suggest that investors and their advisors should integrate philanthropy and investment management to optimize wealth preservation and charitable impact.

Journal Article

A Brief Guide to Pricing and Taxation of Variable Prepaid Forwards

November 6, 2024 - Joseph Liberman Nathan Sosner

Variable prepaid forward (VPF) contracts have been developed as a solution to hedging the risk of concentrated low-basis stock. Using options pricing theory, we develop a VPF pricing model that helps understand the VPF prepayment amount and the cash flows and tax liabilities upon VPF rolls.

Journal Article

Levering Up to Do Good: Direct Long-Short Investing and Charitable Giving

April 23, 2024 - Stanley Krasner Joseph Liberman Nathan Sosner Sydney Filler

We use historical strategy simulations to evaluate the advantages of donating appreciated stock in the context of tax-aware long-short factor strategies. We find long-short strategies exhibit several advantages over long-only investments.

Journal Article

Combining VPFs and Tax-Aware Strategies to Diversify Low-Basis Stock

March 7, 2024 - Joseph Liberman Nathan Sosner

We illustrate how combining VPFs (variable prepaid forwards) with tax-aware strategies can help diversify low-basis stock and thereby improve after-tax wealth accumulation. Long-run after-tax wealth outcomes are significantly better when a VPF is combined with tax-aware long-short factor strategies rather than with other alternatives, such as a direct-indexing strategy or a market index fund.

Journal Article

Loss Harvesting or Gain Deferral? A Surprising Source of Tax Benefits of Tax-Aware Long-Short Strategies

Summer 2024 - Stanley Krasner Nathan Sosner

We explore the mechanism for how tax-aware long-short factor strategies, within their first three years since inception, can realize cumulative net capital losses exceeding 100% of initially invested capital, all while generating a significant pre-tax alpha – a result shown in previous research. Surprisingly, we find in these strategies that net capital losses arise not from an increased realization of capital losses but rather from the deferral of capital gains, especially short-term gains on long positions.

Journal Article

Beyond Direct Indexing: Dynamic Direct Long-Short Investing

May 3, 2023 - Joseph Liberman Stanley Krasner Nathan Sosner Pedro Freitas

On average, net losses realized by direct indexing loss-harvesting strategies taper off within the first few years after their inception, and these strategies also exhibit a high dispersion of net loss outcomes. We show that long-short strategies motivated by factor investing can significantly outperform direct indexing strategies from both a pre-tax and tax perspective.

Journal Article

When Fortune Doesn’t Favor the Bold: Perils of Volatility for Wealth Growth and Preservation

May 12, 2022 - Nathan Sosner

Entrepreneurs and executives holding much of their wealth in a highly appreciated single stock face either the high risk of idiosyncratic volatility and potentially catastrophic losses, or selling stock and facing an immediate, punitive tax burden. This paper evaluates this choice and explains how it relates to classic betting strategies and economic theory, finding tax-efficient techniques might strike the balance between the urgency to diversify concentrated risk and aversion to taxes.

Journal Article

Taxes, Charity, and Hedge Funds: Tax Implications of Charitable Contributions of Leveraged Partnership Interests

January 10, 2022 - Nathan Sosner Roxana Steblea-Lora

As a result of recent Treasury regulations, investors in investment partnerships, such as hedge funds, might end up recognizing capital gains when they contribute their partnership interests to a charity. We explain how such taxable gains upon charitable contributions arise and quantify how punitive they might be.