📉 #BTC exchange inflows are increasing as the price falls to approximately 87K, a seven-month low. Large deposits (100+ BTC) now account for 45% of all inflows, totaling 7K BTC on November 21, indicating that large holders are increasingly transferring BTC to exchanges, which supports the current downtrend.

HMRC has published its consultation outcome in the UK regarding the taxation of DeFi activities related to lending and staking.

A particularly interesting conclusion is that when users deposit assets into Aave, the deposit itself is not treated as a disposal for capital gains tax purposes, creating a ‘no gain, no loss’ (NGNL) approach.

This is a major win for UK DeFi users who want to borrow stablecoins against their crypto collateral

In brief:

• Top active managers across U.S. equities have generated valuable returns over the past 20 years and significantly outperformed bottom-tier managers, highlighting the importance of choosing a manager with high potential to produce consistent strong performance.

• Active managers that incorporate tax management can help investors keep more of their returns by minimizing tax drag.

• Separately managed accounts (SMAs) offer the highest level of flexibility to optimize tax-management strategies.

• The benefits of a Tax-Smart SMA extend beyond tax-loss harvesting to tax-efficient transitions, managing concentrated stock positions and tax-optimized spending and gifting.
  
  Only active management offers the potential to beat the market

  Investing in top-tier active managers offers the greatest potential for wealth compounding: investors may have access to better returns than the market, which can mean generating higher returns in a strong market or losing less when stocks decline. Against a background of already buoyant equity markets, Exhibit 1 shows how $100,000 invested with a top-decile U.S. large cap blend manager would have grown to over $800,000 over a 20-year period. The result is even more dramatic in U.S. large cap growth, where $100,000 invested with a top-decile manager would have topped $1.2 million after 20 years.

  However, the significant difference between the returns of top-tier and bottom-tier managers highlights the importance of choosing a good manager. The difference in cumulative performance between top-decile and bottom-decile managers over 20 years was as high as 616% in the U.S. large cap growth category and averaged 262% across equity categories.
  
  

  

Today’s market environment could make a strong active manager even more valuable. While rising market concentration has rewarded U.S. market cap-weighted index investments, we think it unlikely that the market will continue to compound at double-digit rates. In fact, J.P. Morgan Asset Management’s long-term capital market assumptions for 2026 forecast U.S. equities at 6.7. In an environment where market returns are lower, excess return from active management becomes a more important component of total return.

Select a manager that can generate strong returns over time

How should investors consider an active manager? A first step is to look for broad-based, consistent performance over time, including relative performance vs. the benchmark and comparable investment strategies. For example, in U.S. equities, approximately 77% of J.P. Morgan Asset Management’s assets under management (AUM) has earned the highest rating—five stars—from Morningstar.1 Relative performance has been exceptionally strong, with 92% of AUM ranking in the top two quartiles vs. competitors and 93% of AUM beating the benchmark over the last decade.

A high-performing active manager can produce the greatest amount of compounding wealth. However, investors risk losing some of those hard-earned returns if they have not considered the impact of taxes.

One way to get a more tax-efficient investment experience is to invest in an active ETF. ETFs have potential to defer capital gain distributions, which would leave investors to realize gains primarily when they sell out of their shares of the ETF. For investors looking for an efficient and straightforward way to get exposure to an active investment strategy this option can reduce tax drag each year while the investment is held.

However, some investors are looking for greater customization and flexibility, perhaps due to the size of the portfolio, a concentrated stock position, or the desire to further optimize returns. Tax-Smart SMAs offer access to J.P. Morgan’s active investment strategies through a portfolio tailored to each individual client. These customized portfolios align with specific financial needs and tax considerations, offering further opportunities to proactively harvest losses to offset gains.

Tax-Smart SMAs start retaining returns by harvesting losses

A key benefit for Tax-Smart SMA investors is the ability to tax-loss harvest at the individual stock level, rather than at the fund level. That’s an important feature particularly in a rising market, when a portfolio may have generated positive returns in aggregate, but not necessarily across every stock in the portfolio. A tax-aware manager who is trimming or selling out of a position to manage risk or deliver alpha can potentially realize losses that might be available to offset realized gains from that activity (Exhibit 2). 

To illustrate the potential impact of tax management, we simulated a monthly tax-loss harvesting approach on actively managed SMA strategies across different styles looking at five-year periods with starting years from 2003 to 2019.4 The results show an improvement in after-tax returns of roughly 100-120 basis points (Exhibit 3). For a tax-sensitive investor, a Tax-Smart SMA is a forward-thinking way to preserve alpha. 

Our equity expertise is founded on deep resources across regions and sectors, and a commitment to nurture the brightest talent.

Outcome-oriented active management:

• Benefit from the local market expertise and deep resources of our globally integrated team of experienced equity investment professionals.

• Gain a broader view on equity markets with our timely macro and market views, and be guided by our proprietary portfolio insights and equity analytic tools.

• Invest across a broad range of actively managed equity strategies, covering multiple investment styles and geographies.

• Partner with one of the world’s leading equity managers and benefit from our long history of innovation and success.
  
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  This document is a general communication being provided for informational purposes only. It is educational in nature and not designed to be taken as advice or a recommendation for any specific investment product, strategy, plan feature or other purpose in any jurisdiction, nor is it a commitment from J.P. Morgan Asset Management or any of its subsidiaries to participate in any of the transactions mentioned herein. Any examples used are generic, hypothetical and for illustration purposes only. This material does not contain sufficient information to support an investment decision and it should not be relied upon by you in evaluating the merits of investing in any securities or products. In addition, users should make an independent assessment of the legal, regulatory, tax, credit, and accounting implications and determine, together with their own financial professional, if any investment mentioned herein is believed to be appropriate to their personal goals. Investors should ensure that they obtain all available relevant information before making any investment. Any forecasts, figures, opinions or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions and are subject to change without prior notice. All information presented herein is considered to be accurate at the time of production, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted. It should be noted that investment involves risks, the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Both past performance and yields are not reliable indicators of current and future results.

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