AQR Delphi Plus
To develop the strategy, they were looking to close the gap between pre and post-tax returns for taxable accounts. They found they could not only close the gap, but flip it, completely eliminating the gap and provide an even
AQR Tax-Aware Investing Capabilities
To develop the strategy, they were looking to close the gap between pre and post-tax returns for taxable accounts. They found they could not only close the gap, but flip it, completely eliminating the gap and provide an even better after-tax return.
Delphi Plus
Client needs to have a $5 million investable net worth or a securities license to be eligible.
Funded with cash only - $250,000 minimum.
Offsets ordinary income
Fully liquid
Designed to deliver the best after tax return possible, generating a 14% pre-tax return + 8% tax benefit = 22% after-tax return
Clients get a K1 each year for about $8 per $100 invested.
Tax benefit assumes highest tax bracket.
Do you have value exposure, yes. But it’s just used to help reduce the growthy characteristics of the other two factors – quality and momentum. It’s not above market value exposure.
70% long-short equity, 30% Trend Following
When does it go wrong? When quality does not do well and junk wins. And when there are no trends in the market to follow.
Long/Short equity strategy is .5 beta and on top they put a market neutral global equity extension on top.
Long about 1000 stocks and short about 1000 stocks.
Trend Following – 0 beta over the long term, but fluctuates quite a bit in the short term.
Trades equity markets, currencies, commodities, and fixed income.
A hedge fund would need to produce a 15% return to generate the same after-tax benefit as Delphi Plus at a 0% rate of return.
Trading stocks and derivatives is crucial.
Available at Schwab. 1.75%. (1.50% to AQR, .25% for Schwab.)
K1 – 1 federal K1, no state K1s. Has a K1 guide that AQR put together and have set up calls with people from AQR and CPAs before.
Suggest that tax preparers read the footnotes on the K1. If they aren’t thorough, the CPA might miss things.
Will not need to file for extension.
30-day lead time to get account set up. Pretty significant package will be sent to client.
No proposals since it’s funder with cash and benefit would be consistent.