Model Portfolio & SMA Strategists Showcase - Flipbook - Page 55
SMAs & MODEL PORTFOLIOS
Sharpe Ratio: A risk-adjusted
performance metric comparing a
strategy’s excess return to the amount of
volatility risk taken to achieve it. Higher
values indicate more return generated
per unit of risk.
Sleeve: A distinct portion of a Unified
Managed Account attributable to a
single strategy, manager, or asset class,
allowing separate performance attribution
within a single consolidated account.
Standard Deviation: A statistical
measure of return volatility. Higher
standard deviation indicates a more
variable, “bumpier” investment
experience.
Tactical Strategy: A model or SMA
strategy designed to make significant,
timed shifts between asset classes in
response to changing market conditions,
as distinct from a core strategy that
closely tracks static market allocation.
TAMP (Turnkey Asset Management
Program/Platform): An outsourced
investment operations platform providing
account opening, custodial integration,
trade execution, rebalancing, reporting,
and billing infrastructure, typically layered
on top of third-party model or SMA
strategists.
Tax-Budget Transition: A portfolio
transition approach in which the investor
sets an annual dollar limit for realized
capital gains, with the overall transition
timeline determined by how quickly that
budget allows movement toward the
target allocation.
Tax-Loss Harvesting: Systematically
selling securities at a loss to offset
realized capital gains elsewhere in a
portfolio, reducing tax liability while
maintaining the portfolio’s overall market
exposure. Applicable to both equity and
fixed-income portfolios.
Tax-Sensitivity Setting: A configurable
parameter, common in modern transition
and rebalancing technology, that lets an
advisor specify how much a client’s tax
cost should be weighted against tracking
error when the system proposes trades,
typically on a sliding scale from moderate
to very high.
Tax-Smart Withdrawal: Technologydriven logic that selects which specific
positions to sell to meet a client’s cash
distribution request by pairing securitylevel losses against gains, minimizing the
net tax impact of the withdrawal rather
than selling proportionally across the
portfolio by default.
Timeline Transition: A portfolio
transition approach in which the existing
portfolio moves to a new target strategy
over a fixed, predetermined number of
years, with tax sensitivity governed by
the length of that timeline.
Tolerance Band: The permitted range
of drift around a target allocation weight
within which an overlay system takes no
rebalancing action. Tighter bands mean
more frequent trading and more realized
gains and losses. Wider bands mean
less trading but more allocation drift
between rebalances.
Tracking Error: The divergence between
a portfolio’s return and its benchmark’s
return, reflecting how closely (or loosely) a
strategy follows the index or benchmark
it’s meant to represent.
Transition Management (as a
specialist service): For large or
complex portfolio transitions, a dedicated
service sometimes offered through a
distinct division of an asset manager,
separate from standard onboarding,
bringing specialized quantitative tools
to minimize tax cost and tracking error
during the transition.
Turnover: The rate at which a portfolio’s
holdings are bought and sold over a
given period. Higher turnover generally
increases realized capital gains and
associated tax drag in taxable accounts.
UMA (Unified Managed Account):
A single, fee-based account housing
multiple investment strategies and
sleeves, enabling consolidated
rebalancing, tax management, reporting,
and billing across an investor’s full
portfolio.
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UMH (Unified Managed Household):
An extension of household-level
coordination beyond a single account,
in which a client’s taxable accounts, a
spouse’s accounts, and tax-advantaged
retirement accounts are treated as
one coordinated tax and rebalancing
picture rather than managed separately.
Requires platform technology capable of
seeing and acting across every account
in the household at once, a meaningfully
higher bar than standard single-account
optimization.
Value of an Advisor: A research
framework, in the tradition of Vanguard’s
“Advisor’s Alpha” and similar studies,
that breaks the value an advisor delivers
into discrete, separately estimated
components, such as behavioral
coaching, tax management, rebalancing,
and custom planning, typically expressed
in basis points of added annual value.
Volatility Risk Premium: An asset
class built around systematically selling
options, whether puts, calls, or both, as
a primary source of return rather than as
an overlay on an existing equity position,
distinct from an options-income overlay.
Wash Sale: An IRS rule disallowing a tax
loss on a security sale if a substantially
identical security is purchased within 30
days before or after the sale, relevant
to tax-loss harvesting execution. The
universe of securities considered
“substantially identical” is narrower
for individual bonds than for individual
stocks, giving fixed-income tax-loss
harvesting more flexibility in practice.
White-Label Model: A model portfolio
built and managed by one firm but
marketed to advisors under a different,
typically better-known brand’s name,
meaning the visible brand and the firm
actually responsible for the investment
process are not always the same entity.
A specific version of the Parent duediligence question: Know who actually
built and manages the model, not just
whose name appears on it.
