By Bob Elliott and Nathan Nangia Dec 1, 2025
December doesn’t just mark the season of last-minute shopping, gingerbread houses, holiday feasts, and inevitably, stretchy pants — it also marks the beginning of another meaningful season: tax-loss harvesting.
For many investors, 2025 has been a constructive year, with a traditional 60/40 mix of stocks and bonds posting solid year-to-date gains, which may translate into higher realized capital gains, and a larger tax bill come April.
Tax-loss harvesting is the practice of reviewing taxable accounts and selling investments that are trading below their cost basis, realizing those losses for tax purposes, and then redeploying the proceeds into similar (but not substantially identical) exposures to maintain the overall investment strategy. Because capital gains taxes are assessed on net gains, realized losses can be used to offset realized gains – and, in some cases, a limited amount of ordinary income – potentially reducing an investor’s tax liability, while remaining fully invested in the market. 1
This year’s market environment adds another dimension: return dispersion across asset managers within strategies has been elevated. In practical terms, that means two funds with similar benchmarks may have experienced different outcomes, with some strategies lagging their indices by a wide margin even as the benchmarks have moved higher. For investors, this dispersion can be frustrating, but it also creates a more robust opportunity set for tax-loss harvesting. There are ways to convert those losses into tax arbitrage without abandoning long-term asset allocation. The fund universes are from Morningstar.
Source: Yahoo Finance, Morningstar, Unlimited Calculations
A closer look at Equity Long‑Short, Global Macro, Multi‑Strategy, and Managed Futures strategies in ETF and mutual fund form uncovers a notable trend. Multiple products within these categori
es historically have maintained discernible relationships with their respective benchmarks while significantly lagging in absolute performance this year. That combination is precisely what could make for effective tax‑loss harvesting: investors can sell existing positions at a loss, replace them with another product from the growing roster of liquid alternatives in each category, while staying aligned with their original asset allocation.
The sections ahead examine each strategy groups’ public products that have experienced year-to-date negative returns, list their correlation to their strategy benchmark, and highlight the product’s fee burden. Ultimately, the data suggest there are many compelling tax loss harvesting opportunities available to investors in liquid alternatives this December.
Long-Short Equity
For Long-Short Equity strategies, correlations were calculated over the entire fund history with respect to the monthly HFRI Equity Hedge Index. Returns listed in the charts are total price returns, which may differ from NAV returns. The fund universe, adjusted expense ratio, and fund size are from Morningstar. Returns are as of 11/30/2025.
Sources: Yahoo Finance, Morningstar, Hedge Fund Research Institute, Unlimited Calculations
Sources: Yahoo Finance, Morningstar, Hedge Fund Research Institute, Unlimited Calculations
Global Macro
For Global Macro strategies, correlations were calculated over the entire fund history with respect to the monthly HFRI Global Macro Index. Returns listed in the charts are total price returns, which may differ from NAV returns. The fund universe, adjusted expense ratio, and fund size are from Morningstar. Notably, no ETFs in the Morningstar Macro universe have negative year-to-date returns thus far in 2025, so that table is omitted. Returns are as of 11/30/2025.
Sources: Yahoo Finance, Morningstar, Hedge Fund Research Institute, Unlimited Calculations
Multi-Strategy
For multi-strategy strategies, correlations were calculated over the entire fund history with respect to the monthly HFRI Asset Weighted Composite Index. Returns listed in the charts are total price returns, which may differ from NAV returns. The fund universe, adjusted expense ratio, and fund size are from Morningstar. Returns are as of 11/30/2025.
Sources: Yahoo Finance, Morningstar, Hedge Fund Research Institute, Unlimited Calculations
Sources: Yahoo Finance, Morningstar, Hedge Fund Research Institute, Unlimited Calculations
Managed Futures
For managed futures strategies, correlations were calculated over the entire fund history with respect to the monthly SocGen CTA Index. Returns listed in the charts are total price returns, which may differ from NAV returns. The fund universe, adjusted expense ratio, and fund size are from Morningstar. Returns are as of 11/30/2025.
Sources: Yahoo Finance, Morningstar, Hedge Fund Research Institute, Unlimited Calculations
Sources: Yahoo Finance, Morningstar, Hedge Fund Research Institute, Unlimited Calculations
For investors in the “lagging but similar” products highlighted above, December offers a time sensitive opportunity. By transitioning into related funds this December, investors may reset their cost basis and could generate “tax alpha” to offset other gains within their portfolio.
Rather than viewing these negative returns solely as a disappointment, astute investors could see them as a timely tool for portfolio optimization. As 2025 comes to an end, taking action now could potentially lower tax bills.
For informational and educational purposes only and should not be construed as investment advice. It does not constitute an offer to sell or a solicitation of an offer to buy any security. Opinions expressed are our present opinions only. No Representation is being made that any investment will or is likely to achieve profits or losses similar to those shown herein. No investment strategy or risk management technique can guarantee return or eliminate risk in any market environment. The material is based upon information which we consider reliable, but we do not represent that such information is accurate or complete, and it should not be relied upon as such. The historical analysis should not be construed as an indicator of the future performance of any investment vehicle that Unlimited manages.