PGIM CUSTOM HARVEST U.S. EQUITY PLUS
Minimize or reduce taxes by capturing capital losses that may be used to offset capital gains inside or outside the portfolio.
Tax-Smart Investing Today Helps Build a Stronger Tomorrow
Value of Direct Indexing
Investors seeking tax-smart portfolio management solutions for their highly appreciated assets are increasingly turning to an innovative strategy known as direct indexing.
Direct indexing aims to provide index-aligned returns and simultaneously lower investors’ tax bills by regularly harvesting portfolio losses that can be used to offset gains inside or outside of the portfolio. With its tax-tempering potential, it can serve as a critical component of long-term wealth management success.
Direct indexing assets are expected to grow 12.3% annually and top $800 billion by the end of 2026.1
PGIM Custom Harvest: An Industry Leader With a Distinct ETF-Based Approach
PGIM Custom Harvest is taking direct indexing in an innovative direction. While most direct indexers use individual securities to capture losses, we use low-cost exchange-traded funds. We believe this approach provides investors with an opportunity for the following three key benefits:
STRONGER AFTER-TAX RETURNS
A portfolio can maintain full market exposure without needing to hold cash. By immediately swapping into similar ETFs, investors can benefit in both rising and declining markets.
GREATER TAX-LOSS CAPTURE POTENTIAL
Monitor ETFs throughout the trading day for opportunities to capture tax benefits.
A SIMPLIFIED INVESTOR EXPERIENCE
Investors can gain broad equity exposure through at most 20 sector/regional ETFs versus hundreds of individual stocks.
Featured Strategies
PGIM CUSTOM HARVEST GLOBAL EQUITY PLUS
Seeks to provide broad global equity market exposure while capturing tax benefits.
PGIM CUSTOM HARVEST U.S. EQUITY PLUS 50% HEDGED
Seeks to provide 50% hedged exposure to the broad domestic equity market through long and short portfolio positions while capturing tax benefits.
Featured Insights
Direct Indexing Seeks to Minimize Year-End Capital Gains Impact
Investment brief outlines how direct indexing can offer investors a way to mitigate year-end tax surprises and take greater control of their financial outcomes.
Demand For Direct Indexing Rises with Asset Values
After a second consecutive year of outsized equity returns, investors eager to lock-in profits and/or rebalance portfolios may benefit from direct indexing.
What is Direct Indexing?
Direct indexing is an investing strategy that seeks to replicate the performance of an index.
1The Case for Direct Indexing: Differentiation in a Competitive Marketplace: Cerulli Associates, December 2022
Risks—
PGIM Custom Harvest invests client portfolios in ETFs that generally invest in equity securities. Clients will be subject to the risks associated with equity securities, which include the rapid decline of market values due to general market conditions or company-specific factors. To the extent that a particular sector ETF is a significant portion of the portfolio, factors impacting that sector could cause the portfolio’s value to fluctuate more widely than a more diversified portfolio.
The Smart Capture Investment Process seeks to provide the strategy with exposure aligned with the benchmark while generating capital losses that may be used to offset taxable gains. PGIM Custom Harvest does not seek to outperform the benchmark and thus, client portfolios may underperform other forms of active management. PGIM Custom Harvest monitors ETFs throughout the day in an attempt to help maximize loss capture, not manage risk. There is no guarantee losses will be harvested in any given year.
Investing involves risks. Some investments are riskier than others. The investment return and principal value will fluctuate, and shares, when sold, may be worth more or less than the original cost. Actively managed portfolios may carry additional risks, such as analyses performed cannot always predict outcomes, that the investment techniques applied do not have the expected results, and that external factors can change the course of investment performance. The fees associated with active management may be higher than those associated with passive strategies. Unlike mutual funds, ETF shares are bought and sold at market price, which may be higher or lower than their net asset value (NAV) and are not individually redeemed from the Fund. Shares may only be redeemed directly from the Fund by Authorized Participants in creation units only. You may incur brokerage commissions when buying and selling shares on an exchange or through your financial intermediary, which may reduce returns. Market returns are based upon the closing price or the midpoint of the bid/ask spread, as applicable, at the time when the Fund’s NAV is determined (normally 4:00 p.m. Eastern time), and do not represent the returns you would receive if you traded shares at other times. There can be no guarantee that an active trading market for ETF shares will develop or be maintained, or that their listing will continue or remain unchanged. While the shares of ETFs are tradable on secondary markets, they may not readily trade in all market conditions and may trade at significant discounts in periods of market stress.
The availability of tax alpha is highly dependent upon the initial date and time of investment as well as market direction and security volatility during the investment period. Tax loss harvesting outcomes may vary greatly for clients who invest on different days, weeks, months and all other time periods. A client’s tax alpha will depend on the client’s individual circumstances, which are outside of PGIM Custom Harvest’s knowledge and control.
PGIM Custom Harvest does not provide tax, legal, or accounting advice. This material is for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any transaction. Although PGIM Custom Harvest does not provide tax, legal, or accounting advice, we stand ready to assist clients and their advisors in reviewing the relevant tax rules.
SMAs differ from pooled vehicles like mutual funds in that each portfolio is unique to a single account therefore the investment decisions may vary from those made for other accounts. SMAs do not issue registered prospectuses, and the fee structures differ from those normally seen in mutual funds and generally carry higher account investment minimums. Please remember that there are inherent risks involved with investing in the markets, and investments may be worth more or less than initial investment upon redemption. There is no guarantee that the investment managers' objectives will be achieved. Professional money management is not suitable for all investors. Investment objectives, risk tolerance, and liquidity needs must be reviewed before suitable programs can be recommended. Asset allocation and diversification strategies do not assure a profit or protect against loss in declining markets. Investors should consult with their attorney, accountant, and/or tax professional for advice concerning their particular situation.
This material is being provided for informational or educational purposes only and does not take into account the investment objectives or financial situation of any client or prospective clients. The information is not intended as investment advice and is not a recommendation. Clients seeking information regarding their particular investment needs should contact their financial professional. The investment strategies described herein are those of PGIM Custom Harvest. These materials are being provided for illustrative and informational purposes only. The information contained herein is obtained from multiple sources that are believed to be reliable. However such information has not been verified, and may be different from the information included in documents and materials created by the sponsor firm in whose investment program a client participates. Some sponsor firms may require that these materials are preceded or accompanied by investment profiles or other documents or materials prepared by such sponsor firms, which will be provided upon a client’s request. For additional information, documents and/or materials, please speak to your Financial Advisor.
Investment Products: Are not insured by the FDIC or any other federal government agency, may lose value, and are not a deposit of or guaranteed by any bank or any bank affiliate.
The investment strategies described herein are those of PGIM Custom Harvest LLC. PGIM Custom Harvest is a registered investment adviser and a Prudential Financial company. ©2024 Prudential Financial, Inc. and its related entities. PGIM Custom Harvest, PGIM Investments, PGIM and the PGIM logo are service marks of Prudential Financial, Inc. and its related entities, registered in many jurisdictions worldwide.
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