CheckFree Investment Services, a provider of outsourcing services for money managers, has released a new tax-sensitive trade-modeling tool intended for asset managers managing thousands of accounts.
Typical institutional buy-side firms are targeting more tools that speak to the many nuances inherent in individual accounts, explains Jamie Wahler, senior vice president. The new gain/loss trade modeling tool, MASS (multiple accounts/single security), plugs into APL WRAP, CheckFree's portfolio accounting system and allows managers to trade securities across many portfolios.
"Managers are running thousands of portfolios at the same time, and they need to make sure they're sensitive to the tax consequences of each portfolio," Wahler details. "In some cases, you might want to sell a security at a loss, but only for those individuals who haven't taken significant capital gains, for example."
Most notably, MASS digs into the individual portfolios' holdings and determines the short-term and long-term consequences of buying or selling. Typically, a manager might want to sell a security for his clients, but not for those that will generate short-term gains. The module will allow the manager to sell the security only for those accounts that have held it as a long-term taxable security, and the manager can then wait to sell for the other accounts once their short-term holdings become long term.
Wahler explains that MASS incorporates a query language that reviews the accounts based on all gain/loss criteria tagged within the individual positions in each portfolio. He says the process is "limitless" in its ability to ask tax-related questions.
The process becomes even more complicated for individuals-as opposed to institutions-because many hold accounts such as IRAs or 401ks, which are tax exempt until retirement. "If you have the same amount of money in a taxable account, and you take a short-term gain, your tax consequences are much higher," Wahler says. "There are far more idiosyncrasies in the high net-worth world."
MASS is the second such tax-sensitive modeling tool released by CheckFree. In November, the vendor unveiled SAMS (single account/multiple security), which permits managers to make tax-sensitive decisions for multiple positions within a single portfolio.