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.
The strategy seeks to:
Beginning in November 2021, certain enhancements were made to the strategy that are not reflected in the performance prior to this period. If such enhancements had been in effect during such prior period, the performance above may have differed. After-tax performance, tax alpha and after-tax excess returns are shown for the maximum federal tax rate of 40.8%. After-tax returns decrease as the investor’s tax rate decreases. An investor should evaluate the after-tax performance shown above in light of the investor’s applicable tax rate; the tax rate shown above is used for illustrative purposes only, results will vary by investor.
1 Excess Return is the return of the Strategy minus the return of the benchmark. Accounts in the composite could be subject to different limitations.
2 Tax Alpha equals after-tax excess return minus pre-tax excess return. i.e., the [Strategy’s after-tax return less after-tax benchmark return] minus [the Strategy’s pre-tax return less pre-tax benchmark return] and may be calculated on a gross or net basis.
Past performance does not guarantee future results and current performance may be lower or higher than the past performance data quoted. The investment return and principal value will fluctuate and securities, when sold, may be worth more or less than their original cost.
U.S. Equity Plus 50% Hedged composite began January 1, 2020 and from 11/1/2021 to current, the strategy is benchmarked to 100% long S&P 500 Index/50% short MSCI ACWI Ex US Index. Prior to 11/1/2021, the strategy was benchmarked to 50% S&P 500 Index. The prior benchmark and the current benchmark are linked for purposes of calculating the benchmark performance shown above. All performance is total return. Since Inception performance is annualized. Net returns inclusive of combined 3% management and advisory fee. Both gross and net returns reflect underlying ETF expenses and trading costs but do not reflect the reinvestment of dividends.
Download the PGIM Custom Harvest US Equity Plus 50% Hedged Equity Composite presentation for fee information and criteria for composite performance creation.
Jeff Conway, CFA, CAIA, is the chief investment officer at PGIM Custom Harvest (formerly known as Green Harvest Asset Management)* and is responsible for the overall investment strategy and portfolio management. Jeff joined PGIM Investments in December 2021 and helped found Green Harvest in 2017. He was previously head of Equity and Commodity Derivative Structuring for UBS in New York, where he was responsible for derivative trading strategies and structured product development. Prior to his tenure at UBS, he worked at Morgan Stanley in the Fixed Income Derivative Product Group. Jeff received a B.A. in economics from the University of New Hampshire and an MBA from the MIT Sloan School of Management with a concentration in Financial Engineering. Jeff also holds the CFA and CAIA designations.
Denise Gallo is the senior portfolio manager at PGIM Custom Harvest (formerly known as Green Harvest Asset Management)* and is responsible for day-to-day management of separately managed accounts and oversees operational and back-office functions. Denise joined PGIM Investments in December 2021 and joined Green Harvest in 2018. She was previously an associate portfolio manager at Columbia Threadneedle Investment (CTI) where she served as a portfolio construction subject-matter expert for the ETF business. In 2016, CTI acquired Denise’s former firm, Emerging Global Advisors (EGA), which was a $1.9B emerging and frontier market ETF firm. Denise joined EGA in 2009 as head of fund operations. Denise attended college at Fairleigh Dickinson and has graduated multiple management and trading courses from Merrill Lynch, Columbia Threadneedle, and EGA.
Brian Jacobs, CIMA, is the head of client portfolio management at PGIM Custom Harvest (formerly known as Green Harvest Asset Management).* Brian joined PGIM Investments in December 2021 and helped found Green Harvest in 2017. He was previously the president of Direxion ETFs and the CEO of the Hatteras Alternative Funds. Additionally, he led distribution organizations at Eaton Vance and Allianz/PIMCO, which raised over $200 billion in AUM during his tenure. Brian received a B.A. in economics from Montclair State University and completed the Allianz Global Leadership Program at the International Institute for Management Development (I.M.D.) in Lausanne, Switzerland. Brian is also an adjunct Faculty member at the Gabelli School of Business at Fordham University where he teaches a graduate-level class: Disruption in Financial Services.
Source: PGIM Custom Harvest. Actual holdings and percentage allocation in individual client portfolios may vary and are subject to change.
* PGIM Custom Harvest was known as Green Harvest Asset Management prior to being acquired by PGIM Investments and becoming an indirect subsidiary of Prudential Financial on December 10, 2021. Performance for periods prior to December 10, 2021 was achieved by Green Harvest Asset Management prior to its change in ownership.
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 S&P 500 Index is currently significantly weighted to Technology companies, so the performance of client portfolios will be more impacted by the performance of Technology companies than other types of companies. Technology companies typically face intense competition and risk of products becoming obsolete, factors that can contribute to more volatile performance than other types of companies. The U.S. Equity Hedged 50% strategy seeks to hedge a client portfolio by taking a "short" position in one or more index ETFs, i.e. by selling one or more index ETFs that the client portfolio does not own. Short positions involve costs and risks not associated with owning securities long. Generally, short positions will lose value when a portfolio's overall long portfolio is rising in value, and increase in value when the long portfolio is declining in value. The anticipated inverse relationship between long and short portfolio positions provides the "hedging" aspect of a hedged strategy. While short positions are intended to provide a hedge against negative or low market returns, there is no guarantee that s hedging strategy will perform as desired or anticipated or that a client portfolio following a hedge strategy will not experience negative returns.
S&P 500® Index is a total return, float-adjusted market capitalization-weighted index of 500 common stocks chosen for market size, liquidity, and industry group representation to represent U.S. equity performance. The S&P 500 Index is a product of S&P Dow Jones Indices LLC and/or its affiliates and has been licensed for use by PGIM Investments. Copyright © 2023 S&P Dow Jones Indices LLC, a division of S&P Global, Inc., and/or its affiliates. All rights reserved. Redistribution or reproduction in whole or in part are prohibited without written permission of S&P Dow Jones Indices LLC. For more information on any of S&P Dow Jones Indices LLC’s indices please visit www.spdji.com. S&P® is a registered trademark of S&P Global and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC. MSCI ACWI ex USA Index captures large and mid cap representation across 22 of 23 Developed Markets (DM) countries (excluding the US) and 24 Emerging Markets (EM) countries. With 2,274 constituents, the index covers approximately 85% of the global equity opportunity set outside the US. Alpha: refers to excess returns earned on an investment above the benchmark return.
The composite includes all discretionary accounts that are managed by PGIM Custom Harvest in accordance with its U.S. Equity Plus 50% Hedged Strategy that are not subject to client-imposed restrictions significantly impairing PGIM Custom Harvest’s ability to implement the strategy. For periods after Jan. 2020, accounts with significant cash flows are temporarily excluded from the composite. A new account is included in composite at beginning of first full month after initial trades have been implemented. A terminated account is removed at end of the last full month it was under PGIM’s discretion.
Alpha: alpha refers to excess returns earned on an investment above the benchmark return.
PGIM Custom Harvest does not provide tax advice. We work with outside accounting firms and tax counsel that provide guidance and updates on relevant tax law, and we have reviewed the tax treatment of our transaction structures with those professional advisors. Based on those reviews, PGIM Custom Harvest is satisfied that our structures support the desired tax results, but each client must consult their own legal and tax advisors regarding the tax treatment of the transactions effected in their account. Such transactions include ETFs. Federal, state and local tax laws are subject to change. PGIM Custom Harvest is not responsible for providing clients updates on any changes in tax laws, rules or statutes. Clients remain fully responsible for their own tax position and client is solely liable for any tax consequences and associated costs resulting from any investment in the Strategy.
The Strategy’s after-tax returns are calculated using actual before-tax returns for client accounts in the Strategy’s composite that have been adjusted to estimate the benefits of using tax losses harvested to offset capital gains (inside or outside of the portfolio) and adding such benefits to portfolio returns. While the calculation is based on the actual transactions that occurred in each client account and an assumed federal tax rate, the adjustments did not occur in each client account. Illustrated are the after-tax return calculations using the highest federal marginal income tax rate of 40.8% applicable to short-term capital gains and a 23.8% long-term capital gains rate. The calculation assumes that dividend income received in each account will be taxed at the assumed income tax rate applied to short-term capital gains.
The after-tax returns are subject to the limitations of the specific calculation methodology applied and the tax rate assumptions made. The after-tax returns shown may not reflect a client’s actual after-tax performance due to differences in the tax rate assumed and other circumstances. As examples, clients with lower applicable tax rates, capital loss carryforwards or no capital gains outside the portfolio are likely to experience lower levels of after-tax returns. In addition, estimated tax benefits relating to a tax loss harvesting transaction are added to portfolio returns in the same year as the transaction, even though the tax benefits do not become available until the following tax year.
PGIM Custom Harvest has approximated after-tax returns for the benchmark by adjusting the Index’s monthly price returns by its dividend yield after applying a 32.3% tax rate, which assumes that half of dividends are taxed at the 23.8% rate applicable to qualified dividends and the other half at the 40.8% rate for ordinary income. Benchmark after-tax returns are provided for informational purposes only and are not intended as a measure of PGIM Custom Harvest’s tax alpha compared to the benchmark. Significant differences between the calculation methodologies for Strategy and benchmark after-tax returns limit comparability between the returns. For example, the benchmark returns do not include the after-tax impact of capital gains, and different rates have been applied to dividend income.
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.
Risks—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.
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.
PGIM Custom Harvest is a registered investment adviser and a Prudential Financial company. © 2023 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.
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.
For compliance use only 1059174-00005-00