I’m sick of seeing this many alts in the taxable portfolios I review

On paper, it always looks great:

• Smoother returns
• Lower correlation
• “Enhanced” yield

In reality, many of these are some of the least tax-efficient investments you can own.

This week I spoke with a senior investment professional who had 25% of his taxable account in a trend-following strategy.

Pre-tax? Fine.

After-tax (CA, top bracket)? ~4%.

For a quarter of the portfolio.

That’s not diversification — that’s drag.

And it’s not just trend-following:

• High-turnover equity strategies
• Private credit throwing off ordinary income
• Hedge funds with constant short-term gains

They improve the pre-tax chart.

But you don’t eat pre-tax returns.

For high-bracket investors, many off-the-shelf alts simply don’t belong in taxable accounts.

The good news: you don’t have to choose between diversification and taxes.

Tax-aware implementations of alts — long/short, trend, real estate — can:

• Add new risk drivers beyond stocks/bonds
• Sometimes reduce your tax bill instead of increasing it

If senior investment professionals still get this wrong, you’re not crazy if you have too.