PT - JOURNAL ARTICLE AU - Hemambara Vadlamudi AU - Paul Bouchey TI - Is Smart Beta Still Smart after Taxes? AID - 10.3905/jpm.2014.40.4.123 DP - 2014 Jul 31 TA - The Journal of Portfolio Management PG - 123--134 VI - 40 IP - 4 4099 - https://pm-research.com/content/40/4/123.short 4100 - https://pm-research.com/content/40/4/123.full AB - In this article, the authors focus on the after-tax performance of several smart-beta strategies. These strategies have higher turnover than the capitalization-weighted index, which leads to a greater tax on returns. Despite this drag, most strategies retain a long-term excess return. The authors also test the effectiveness of tax-managed versions of the strategies. They observe that, relative to most active managers, smart-beta strategies have lower turnover, greater breadth, and are less concerned with stock selection. By allowing a tracking-error risk budget versus the original strategy, tax management can reduce much of the tax impact.TOPICS: Manager selection, passive strategies, statistical methods