The long-running stock bull market has left America’s wealthiest with a tax problem: too many investment gains with too few losses. With major indexes marching ever higher, and as founders and early employees of tech firms accumulate fortunes in concentrated stock positions, it’s become harder and harder for wealthy folks to identify losers that they can use to “harvest” losses to offset their capital gains.
A fast-growing strategy designed to fix this problem has become the toast of the investment industry, from the Wall Street hedge funds crafting the products to the independent advisors hawking them to clients. In the so-called long-short tax-aware strategy, an investor uses leverage to make hundreds, even thousands, of additional bets on stocks—some that they own, and some that they short. (Shorting is betting that a stock will fall: you borrow shares, sell them and later buy them back, preferably at a lower price). The novel formula deliberately creates plenty of losses, on either its long or short positions, which investors can harvest to strategically offset gains elsewhere, while keeping most of their money invested in the rising stock market.
Today, the assets committed to long-short tax aware strategies are fast approaching $200 billion, up from just a few billion five years ago. With an estimated $260 billion under management Greenwich-based AQR Capital Management, a 750-person hedge fund and asset manager, is well known as a pioneer of this trading strategy. Its success has prompted blue chip copycats from asset management giants like BlackRock, Nuveen, and Franklin Templeton to fellow quant hedge funds like Two Sigma and WorldQuant. All have recently launched or are exploring similar “long-short tax aware” offerings. However, AQR’s biggest rival is a little known New York City-based firm called Quantinno Capital Management. In fact Quantinno’s founder, a 57-year-old accounting PhD named Hoon Kim, actually helped create one of AQR’s first long-short funds during his 12-year run at AQR.
As of March 2026 Quantinno’s assets were reported to be $48.4 billion across 10,600 individual accounts, up from less than $300 million five years ago, according to its website and public filings. This net assets figure has since been removed from Quantinno’s website, but in less than six months assets have further ballooned to around $70 billion, says one wealth advisor familiar with the firm's numbers. “I would call their success remarkable. I’ve actually never seen anything like it,” says Brent Sullivan, a tax analyst and founder of the blog Tax Alpha Insider.
Back in March, Sullivan estimated there were around $150 billion in net assets across long-short tax aware separately managed accounts or SMAs. He now pegs that number at around $170 billion among the four largest players: AQR and Quantinno, followed by Gotham Funds and BlackRock’s Aperio, with smaller players clamoring to get in on the gold rush. But it is Quantinno and AQR that are essentially in a two-horse race to dominate this market, each with around $70 billion in the strategy. “They are the biggest by a mile,” says Sullivan.
Kim would not be interviewed for this story, but it's clear that the firm’s explosive growth is coming from wealth managers whose clients are clamoring for sophisticated tax avoidance in light of the large gains afforded by the stock market boom. In fact, Kim initially launched Quantinno in 2018 as a tax-aware long-short hedge fund, but quickly pivoted to applying this investment strategy to SMAs, which are the core offering for hundreds of thousands of wealth managers with high-net-worth clients. Unlike traditional mutual funds or ETFs, SMAs can be tailored to each individual holder’s preferences and goals. There is currently estimated to be $4 trillion in retail separately managed accounts.
“We can customize what each strategy looks like for each client,” said Kim in a 2021 appearance of the Prime Alpha podcast.
Quantinno's meteoric rise has vaulted Kim, a media-shy quant who lives in a $2 million home in the Westchester suburb of Scarsdale, NY, into the ranks of Wall Street’s self-made billionaires. His majority and controlling stake in Quantinno is now worth upwards of $1 billion, Forbes estimates, and possibly much more, depending on the price tag an acquirer might put on it. “There's no public comparable” rivaling Quantinno’s growth over the last two years, says Zach Milam, a vice president at advisory firm Mercer Capital who specializes in valuing asset managers. “This is a strategic asset in one of the fastest-growing product categories in wealth management.”
The trillion-dollar question for Quantinno, AQR, and their imitators is how long the party can go on. Two of the largest U.S. custodians, Fidelity and Schwab, are clamping down on long short accounts over fears about the potential implications for their own books from investors taking on too much leverage, because it’s the custodians that are providing margin loans to the investors. On the distribution side, some advisors are growing wary that the strategy is being oversold to investors who don’t understand it or who might not actually benefit from it. Moreover, taking on large amounts of debt, which is reinvested in the stock market poses, potentially broader stock market risks.
“The strategy is untested in a downturn, and the whole category carries stroke-of-the-pen tax policy risk,” says Milam. “Asset management is full of firms that grew fast and crashed faster.”
Born in 1968, Hoon Kim grew up in South Korea and studied business at prestigious Yonsei University in Seoul before moving to Pittsburgh to get an MBA and PhD in accounting at Carnegie Mellon University between 1996 to 2001. For his graduate work, which examined how accounting information relates to stock price valuations and asset-price volatility, he studied under renowned economists and accounting theorists Yuji Ijiri (d. 2017) and Shyam Sunder. “I remember him as a very bright and industrious student,” says Sunder, now 82 years old and a professor at Yale School of Management. “He was always thinking of and open to new ideas.”
In 2001, Kim started his career at Mellon Capital Management, the index-investing arm of Mellon Financial (now part of BNY), leading its quant equity research arm. In 2005, he hopped to AQR, a hedge fund founded in 1998 by Cliff Asness, David Kabiller, Robert Krail and John Liew after work that grew out of Asness’s Goldman Sachs quant team. Originally structured as a traditional hedge fund with institutional clients, AQR pivoted after the financial crisis into more retail-friendly products. It deployed its computer models to replicate hedge fund returns at lower costs, packaging these strategies in mutual funds with quant-driven alpha, spurring a hot streak for the firm.
By 2012, Kim was helping oversee AQR’s global stock selection team. That year he helped launch AQR’s defensive equity mutual-fund suite, a trio of long-only funds designed to minimize risk. In 2016, he became a portfolio manager of AQR’s long-short equity fund, an open-end mutual fund. Later that year Kim helped launch a new hedge fund, one of AQR’s early tax-aware long-short funds. “It’s a great idea because, if you think about it, we can harvest tax losses in any market environment,” said Kim in the podcast appearance, explaining how the strategy works. “Stocks making money, [or] stocks losing money.”
Kim left AQR in early 2018 and founded Quantinno later that year. He recruited from his former employer two colleagues on the global stock selection team, Paul Giordano and Albert Kim, business development ace Glenn Shirley to lead investor relations, and grizzled 30-year hedge fund veteran Todd Saunders, an old colleague of his at Mellon Capital Management. The four men joined in 2018 as C-suite partners with minority stakes in the business. Tishman Capital Partners, a family office affiliated with the family-owned Manhattan-based real estate developer, served as Kim’s first anchor investor, investing close to $70 million for Quantinno to manage, filings show.
But the real opportunity, Kim quickly realized, lay in the untapped war chest of registered investment advisors and wealth managers, whom Quantinno could woo with customizable SMAs. In 2021, Quantinno launched its DEALS platform, designed to give advisors easy access to its long-short accounts. Around that time, Fidelity Investments, the largest U.S. brokerage, agreed to set up its first long-short tax-aware account, reportedly at the urging of one of Quantinno’s clients (who was also a Fidelity client). Fidelity subsequently slashed its investment minimums in the strategy, helping usher in a wave of third-party advisors eager to help their clients defer taxes. AQR followed Quantinno with its own RIA-focused long-short SMA platform, dubbed Flex, in 2022. Both firms now have an investor minimum of $1 million.
“The SMA thing has really resonated with the adviser channel,” says tax analyst Sullivan. “They want mass customization and the SMA wrapper does that.”
Traditional tax-loss harvesting is simple in concept. An investor sells a stock that has declined, books the loss and buys a sufficiently different replacement, while the loss can offset gains made elsewhere. Over time, a long-only portfolio can become difficult to harvest: the losers are sold, with only winners remaining. Industry insiders term this phenomenon "ossification,” and ossification has become an endemic problem during the nearly 4-year bull market run.
Say you’re an employee at Nvidia who is now sitting on a $10 million pile of highly appreciated stock with a tiny cost basis. You want to begin cashing out, but you don’t want to pay a hefty capital gains tax, and you also don’t want to lose out on compounding market wealth. Enter the long-short separately managed account. In the popular 130/30 long-short portfolio, your $10 million Nvidia position serves as the starting capital and collateral. The manager uses margin borrowing to purchase $3 million of additional long positions and separately shorts $3 million of other stocks. The result is approximately $13 million long and $3 million short, or $10 million of net market value. Losses generated on either side can then help offset gains as you gradually sell Nvidia stock. Those losses can also help you if there are other unrealized gains in your portfolio that you want to exit, such as stakes in private companies or mutual funds in your brokerage account.
For more aggressive investors, there are other options: the 200/100 strategy ups the stakes to $20 million long and $10 million short; the 300/200 reaches $30 million long and $20 million short—five times the original capital in gross exposure. These versions come with greater account minimums.
The ideal end-game of the strategy is for the investor to pass away and leave their account to heirs. Under a tax provision commonly known as the stepped-up basis, inherited property generally takes a basis equal to its fair market value at death, so any increase in value during the original owner’s lifetime generally is not subject to capital-gains tax. In a long-short account, investors can defer taxes not only on the original collateral (in this example, the Nvidia stake), but also on appreciated stock positions financed with leverage.
Absent that step-up, though, and the long-short strategy merely postpones the capital gain tax bills, rather than eliminating them. (This distinction is very important, says AQR chief Cliff Asness). After all, the whole idea of the long-short is to offset taxes while adding bigger gains embedded in the rest of the portfolio. But if an investor suddenly needs cash, they may have to liquidate their holdings early and recognize those taxable gains. “You’re entering into one of the longest-term strategies that you might see in your lifetime,” says Aaron Brachman, an advisor at Washington DC-based Steward Partners ($1.4 billion AUM), who advises clients to set up long-short strategies only if they’re prepared to hold them their entire lives.
Put another way: “You’re married to your managers,” says Matthew Lusins, a Jackson Hole, WY-based advisor who previously worked in Jim Simons’ family office. “It’s not like you can just pick up 2,000 positions and accounts [and easily move] somewhere else.”
Then there are the fees. On top of a fee to the subadvisor (Quantinno charges about 0.45% of assets), the investor absorbs financing costs paid to the custodian, which are typically anywhere from 50 to 150 basis points (0.5% to 1.5% of assets), as well as transaction costs that are tiny but actually add up as the portfolio is constantly rebalanced. These expenses, which can add up to as high as 3% of assets being managed, put pressure on firms like Quantinno and AQR to generate pre-tax alpha in their stock selection process.
“You’ve got to have some way to outperform just to recover from those headwinds,” says Lusins, who likes the long-short investment for some clients, but says plenty of people getting pitched would be better off without. “I worry about people rushing into this space,” he says. “You see it time and time again with these innovative strategies. People rush in and returns get depressed. There’s a lot of buyer’s remorse.”
Quantinno’s next act will test whether demand from wealthy investors can outrun the risk controls of the firms that hold their accounts, and whether its red-hot strategy can survive a bear market.
In the last year, two of the largest U.S. custodians have crashed the party. Fidelity, which helped kickstart the long-short SMA craze, stopped opening most new accounts in December 2025 and raised financing costs for some existing clients earlier this year. Fidelity, which provides custody and clearing services for over 3,400 advisory firms, custodied 52% of Quantinno's client assets as of March.
Schwab, which only entered the business in 2025, already custodied 32% of Quantinno’s assets as of March. Like Fidelity, Schwab, which provides custody services for over 16,000 registered investment advisors, tightened its rules in recent months. It limited new accounts to leverage amounts of 200% long and 100% short, and capped each adviser’s allocation to the strategy at 30% of total client assets held in custody at Schwab.
If Quantinno has to look elsewhere for custody services, it has options. Pershing Advisor Solutions LLC, an affiliate of BNY, which managed about 13% of its assets as of March, is one such alternative. Interactive Brokers, Apex Fintech Solutions and Goldman Sachs, emerging players in the long-short custody market, are also on tap.
Though a swift and deep bear market would certainly disrupt long-short tax-aware account growth, advisers who spoke with Forbes expressed confidence in Quantinno’s ability to manage leverage, and as being more willing to tailor plans around each client’s circumstances.
“From the beginning, my expectations for what they were doing have been met,” says one such happy customer, Matt Fitzsimmons, managing partner of the $700 million Watchman Group, an RIA headquartered in Plano, TX, with clients all over the country.
Advisors like Fitzsimmons are the all-important gatekeepers of Quantinno's future. If the quant shop can keep the advisors on board, then sky’s the limit. After all, there is an insatiable demand for paying less taxes—even if it means doing something with your money that you don’t quite understand. “I don’t think anyone’s asking about [long-short strategies], our clients are not,” says Fitzsimmons. “I don’t care if they’re worth $10 million. They might not understand what shorting a security means.”