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Tax Effective Management

TEAM™ For Taxable Clients

  • Philosophy for Tax Effective Asset Management
  • Strategy - How do we manage taxable accounts differently from tax-exempt ones?
  • Keys to Understanding Our Approach

 Philosophy

TEAM™ represents our Tax Effective Asset Management philosophy. At Mawer, we believe that taxable and non-taxable clients should be managed independent from one another.

Why? Well, tax-exempt investors monitor their pre-tax returns, whereas taxable investors only care about their returns after-tax.

 Strategy

How do we manage taxable accounts differently from tax-exempt ones?

It starts by applying a tax management strategy that overlays our security selection processes. You cannot have a high after-tax return without a high pre-tax return. Therefore, the security selection decision for all accounts is made free from tax considerations. We do not believe tax consequences affect the valuations of the companies we own, so for taxable accounts, we have an independent portfolio manager review every trade and monitor every taxable account on an after-tax basis.

In addition to the continuous tracking of realized gains for every taxable client, our TEAM managers also look for tax-effective trading opportunities. The purpose of this tax-effective trading is to harvest capital losses, when the market allows it, so that they can be used to eliminate taxable capital gains. This is accomplished either by replacing a security with cash or a highly correlated substitute. We typically look for these opportunities throughout the year, as we do not believe it is efficient to do it during the year-end "tax loss selling season" when everyone else is doing it.

TEAM is not only about minimizing current tax consequences; it is also about minimizing future tax consequences. In Canada, all taxable portfolios will, at some point, dispose of assets, at which point capital gains will need to be realized and tax paid upon. This will occur either because cash will be drawn out of the account or on the death of the client, at which time a deemed disposition creates a capital gains tax on all unrealized gains. Our TEAM philosophy attempts to manage this inevitable future tax liability by intentionally triggering and crystallizing gains in tax years when it makes the most sense for the client and lessening the final tax burden on the account.

 Keys to Understanding Our Approach

Mawer is ideally suited to manage taxable portfolios.

  1. We manage portfolios in-house across all asset classes. This allows us to maintain control over the investment process in each asset class and look for harvesting opportunities in geographic areas that may not be occurring in others.
  2. Our "growth at the right price" investment style allows us to control the amount of security turnover that occurs. High turnover can destroy a lot of after-tax value in your portfolio.
  3. We do not let the tax consequences alter our sell discipline. If we feel a security is overvalued or has fundamentally changed, we will not hesitate to sell no matter what the tax bill.

At Mawer, we implement a TEAM philosophy to recognize the tax concerns of our clients.

Portfolio Manager

Craig Senyk, CFA, Director of Portfolio Management

Need More Information?

If you wish to receive detailed information about our investment services for discretionary balanced portfolios, please e-mail us at Mawer Information .