AQR: Common Misconceptions About Tax-Aware Long-Short Investing (Part 2) — The Misleading Analogy to Direct Indexing

AQR has published the second installment of its research series on tax-aware long-short (TA LS) investing, clarifying two misconceptions arising from analogies to direct indexing. First, the tax benefits of TA LS come primarily from deferred capital gains rather than active loss harvesting: its loss realization pace is similar to ordinary tax-insensitive strategies, and tax-aware optimization is mainly used to avoid selling positions with existing unrealized gains, especially short-term gains.