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Can New York Asset Managers Deliver Tax-Aware, Multi-Currency Portfolios? A Technical and Practical Guide

What the actual strategies are, how New York’s regulatory and tax environment shapes them, and what the 2025–2026 legislative changes mean for implementation

The short answer is yes — but with important qualifications about what “tax-aware” and “multi-currency” actually require in practice, and why the gap between genuine capability and marketing language in this space is wider than in almost any other area of wealth management.

New York-based asset managers have a documented, verifiable capability to deliver tax-aware multi-currency portfolios. Russell Investments, Goldman Sachs Asset Management, New York Life Investments, and a range of boutique separately managed account (SMA) providers have live, functioning products in this space. What varies sharply across firms is the depth and sophistication of implementation — whether tax-awareness is genuinely embedded in portfolio construction and ongoing management, or whether it is a feature applied retrospectively at year-end through tax-loss harvesting alone.

What Tax-Aware Portfolio Management Actually Means

Tax-aware portfolio management is not a single technique — it is a discipline that integrates tax consequences into investment decisions continuously rather than treating taxes as an afterthought. The key distinction is between tax-efficient investing (choosing structurally tax-advantaged instruments) and tax-aware investing (actively optimising the timing, realisation, and character of gains and losses throughout the portfolio lifecycle).

Goldman Sachs Asset Management’s December 2025 paper on tax-aware active management describes this distinction with precision: the question is not just which securities to hold, but when to realise gains, how to sequence rebalancing to minimise tax drag, and how to maintain desired factor exposures while minimising unnecessary taxable events.​

Tax-Loss Harvesting: The Core Mechanism

Tax-loss harvesting involves deliberately selling positions that have declined in value to realise a capital loss, which offsets realised capital gains elsewhere in the portfolio, reducing current tax liability. The harvested position is replaced immediately with a substantially similar — but not identical — security to maintain portfolio exposure and avoid triggering the IRS wash-sale rule, which disallows the loss if the same or substantially identical security is repurchased within 30 days before or after the sale.​

Effectiveness determinants:

• Harvesting only generates value in taxable accounts — it has no benefit in tax-deferred accounts (IRAs, 401(k)s) where gains and losses carry no current tax consequences​

• The benefit is proportional to the tax rate differential between ordinary income and long-term capital gains — at the 37% top bracket, harvesting short-term losses that offset short-term gains produces materially greater savings than harvesting long-term losses offsetting long-term gains​

• Excess losses beyond current-year gains can offset up to $3,000 of ordinary income annually, with indefinite carry-forward of any remaining excess​

2025–2026 regulatory change — digital assets: As of January 2025, crypto brokers are required to report digital asset activity to the IRS using Form 1099-DA, with wallet-by-wallet cost basis tracking and mandatory FIFO (first-in, first-out) accounting effective 2026. For multi-asset portfolios including digital assets, this tightens the documentation requirements for loss harvesting significantly — the flexibility of pooled or averaged cost basis across platforms is eliminated. Tax-aware managers must now maintain per-wallet records to substantiate harvested losses.​

Asset Location: The Structural Layer

Asset location is the strategy of placing assets in the account type — taxable, tax-deferred, or tax-exempt — that maximises after-tax return based on the asset’s tax characteristics. The core framework:​

• Tax-deferred accounts (Traditional IRA, 401(k)): Best suited for high-turnover strategies, actively managed funds, high-yield bonds, and REITs — assets that generate ordinary income or short-term gains that benefit most from deferral

• Tax-exempt accounts (Roth IRA, Roth 401(k)): Best suited for highest-growth assets — if held to term, all growth is tax-free, making these accounts most valuable for assets expected to appreciate most substantially

• Taxable accounts: Best suited for tax-efficient instruments — index ETFs with low turnover, municipal bonds (whose interest is federally tax-exempt), individual stocks held for long-term capital gains treatment, and direct indexing strategies

For New York-specific clients, the overlay of New York State income tax (top marginal rate 10.9%) and New York City income tax (top rate 3.876%) on top of federal rates creates total marginal rates exceeding 50% for short-term gains at the top bracket. This amplifies the value of asset location and loss harvesting relative to clients in lower-tax states — and it is a genuine reason why New York-based wealth management has developed particular sophistication in this area.​

The 2026 Legislative Context: OBBBA Changes

The One Big Beautiful Budget Act (OBBBA) of 2025–2026 introduced material changes relevant to family office and UHNW tax planning in New York:​

• Permanent estate/gift/GST exemption at $15 million per individual, indexed for inflation starting 2026, eliminating the sunset concerns from the Tax Cuts and Jobs Act

• Permanence of TCJA individual rates, including the 37% top bracket

• Expanded Qualified Small Business Stock (QSBS) benefits, creating fresh tax planning opportunities for family offices with private company exposure

• Temporary no-tax treatment for certain tip and overtime income through 2028

The permanent $15 million estate exemption has immediate portfolio implications: the urgency of gifting assets before a lower exemption triggered by sunset has been removed, which allows family offices to focus on optimising the timing of wealth transfers for financial rather than tax-deadline reasons. The valuation discount strategies — family limited partnerships creating 20–40% discounts on non-controlling interests — remain effective within this framework.​

Family offices implementing these strategies are documented to generate $100,000 to $500,000 or more in annual tax savings through targeted deductions, formalised management fee structures, and trust-based transfer planning.​

What Multi-Currency Management Actually Requires

Multi-currency portfolio management is technically distinct from tax-aware investing, though the two interact at the compliance layer. The currency dimension adds three functional requirements absent from single-currency portfolios.

Currency Risk Quantification

Every non-USD position in a portfolio carries FX exposure unless explicitly hedged. The total return in USD terms is:

RUSD=(1+Rlocal)×(1+RFX)−1RUSD=(1+Rlocal)×(1+RFX)−1

where RlocalRlocal is the return in the asset’s local currency and RFXRFX is the change in that currency’s value against the USD. For a UK equity position delivering 8% in GBP terms, a 6% GBP depreciation against USD produces approximately 1.5% in USD terms — transforming an adequate local return into an almost negligible one.​

This arithmetic means that currency exposure is not optional in multi-currency portfolios — it is a deliberate, quantifiable decision. Passive exposure (no hedging) is itself a strategy, one that benefits from foreign currency appreciation and suffers from depreciation. Neutral or active hedging eliminates or manages this exposure at a cost.

Hedging Instruments and Costs

The primary instruments for managing currency exposure:

FX forwards — contracts to exchange currencies at a fixed rate on a specified future date. The most widely used institutional hedging instrument. The cost of hedging through forwards is determined by interest rate differentials between the two currencies (covered interest rate parity). When U.S. interest rates exceed foreign rates — as has been the case for much of 2022–2025 — USD-based investors pay a positive cost to hedge foreign currency exposure back to USD, reducing the yield advantage of foreign-currency fixed income.

Currency-hedged ETFs — exchange-traded funds that embed forward hedging within the fund structure. iShares MSCI EAFE Hedged USD (HEFA) and Deutsche Bank’s DBEF are examples. The hedge ratio is typically 100%, removing most FX exposure but at the built-in cost of the rolling forward hedge.​

Currency overlay — a specialist approach where currency management is separated entirely from the underlying asset management. An overlay manager actively manages the portfolio’s aggregate currency exposure as a distinct mandate, adjusting hedge ratios dynamically based on currency signals. A well-documented case involves an Asian family office that separated equity/bond management from currency risk via an overlay manager, improving overall portfolio performance without compromising the underlying investment strategy.​

Options — put or call options on currency pairs provide asymmetric protection, allowing portfolios to benefit from favourable currency moves while capping downside from adverse moves. More expensive than forwards but preserve upside optionality.

The Hedging Decision Framework

Not all currency exposure warrants hedging, and the decision depends on three factors:​

1. Correlation of the currency with the underlying asset: Commodity currencies (AUD, CAD, NOK) tend to be positively correlated with commodity price cycles — in a portfolio already long commodities, unhedged commodity currency exposure may provide natural reinforcement rather than unwanted noise

2. Hedging cost relative to expected currency move: When the hedging cost (interest rate differential) is high relative to expected currency movement, the hedge destroys more value than the currency risk would

3. Portfolio’s base currency and client’s spending currency: A family office with significant EUR-denominated expenditure (a European residence, for example) for whom USD is the portfolio base currency should treat EUR exposure differently than a purely USD-spending family — the EUR exposure may be a natural hedge against EUR expenses rather than a pure risk to be eliminated

FATCA and CRS: The Compliance Infrastructure for Multi-Currency Portfolios

For New York asset managers managing portfolios with foreign account components — non-U.S. custodians, foreign fund investments, offshore structures — FATCA and CRS compliance is not optional. It is the compliance infrastructure through which multi-currency portfolio management operates legally.

FATCA (Foreign Account Tax Compliance Act) requires Foreign Financial Institutions (FFIs) to identify and report U.S.-person accounts to the IRS, or face a 30% withholding tax on U.S.-source payments. The U.S. has IGAs (Intergovernmental Agreements) with over 100 jurisdictions that determine the specific reporting mechanism. For a New York asset manager, FATCA compliance means: ensuring that any foreign fund, custodian, or counterparty used in a multi-currency portfolio is FATCA-compliant; maintaining documentation of entity classifications; and understanding the reporting obligations triggered by client account structures.​

CRS (Common Reporting Standard) is the OECD’s equivalent framework, under which over 110 participating jurisdictions automatically exchange financial account information with each other. A U.S. citizen or permanent resident holding accounts in a CRS-participating jurisdiction can expect that account information to be reported to the IRS through the exchange mechanism. For UHNW clients with multi-jurisdiction structures, this creates a documentation and compliance burden that must be managed proactively: all foreign accounts must be disclosed on FBAR (FinCEN Form 114) if aggregate foreign financial account balances exceed $10,000 at any point in the year, and on IRS Form 8938 (FATCA) if specified thresholds are met.​

Deloitte’s 2025 analysis of FATCA/CRS compliance identifies the primary challenge for financial institutions as the increasing volume and complexity of reporting requirements, with institutions facing growing pressure to invest in automated compliance infrastructure to handle multi-jurisdictional reporting accurately and on time.​

Direct Indexing: The Intersection of Tax-Awareness and Multi-Currency Capability

Direct indexing — holding individual securities that replicate an index rather than a pooled fund — has become the flagship technology for tax-aware portfolio management at the individually customised level.

The tax advantage is mechanical: a pooled fund (ETF or mutual fund) must track the index, so when one security appreciates while another declines, the fund manager cannot harvest the declining security’s loss for a specific investor — the decision affects all fund shareholders equally. In a direct index, the manager harvests losses in individual declining securities while maintaining the portfolio’s overall index exposure by holding the remaining securities or substituting with close correlates. Over a full market cycle, this can generate 0.5–1.5% of additional after-tax return annually relative to a comparable ETF strategy — a material advantage that compounds significantly over time.​

For multi-currency portfolios, direct indexing at the international equity level allows tax-loss harvesting of individual foreign positions rather than treating the entire international allocation as a single ETF position. A portfolio holding individual European or Japanese equities can harvest losses in declining individual securities while maintaining the overall geographic allocation — a granularity unavailable through currency-hedged ETFs.

Providers serving New York-based family offices and HNW clients in the direct indexing space include: Parametric Portfolio Associates (now part of Morgan Stanley), AQR (which offers tax-managed extensions via SMAs), Quantinno, and Brooklyn Investment Group.​

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Disclosure: This article is an independent educational resource produced for informational purposes only. It does not constitute tax advice, legal advice, or investment advice. Tax laws, including the provisions described from the OBBBA, FATCA, and CRS, are subject to change and vary by individual circumstances and jurisdiction. Quantitative benefits of tax-loss harvesting and direct indexing cited are illustrative ranges and are not guaranteed for any specific investor or portfolio. All investment decisions and tax strategies should be developed in consultation with qualified tax counsel, legal advisers, and licensed investment professionals. Any commercial platforms linked in the distribution of this content should be evaluated independently.