Family offices in the U.S. are embracing a new way to seek enhanced after-tax returns.
 

Tax-Managed Equity (TME) and Tax-Managed Fixed Income (TMFI) are two strategies that help reduce tax drag on realized investment returns, allowing more capital to remain invested and compound over time. According to the 2026 Investment Insights for Single Family Offices report, 45% of family offices currently use TME strategies and 36% use TMFI.
 

Here is how these strategies work, which offices are implementing them and what to consider before putting them into practice.

Tax-Managed Equity (TME) Strategies

Tax-Managed Equity (TME) strategies seek to minimize taxable events within equity allocations. By managing gains, losses, dividends and portfolio turnover more deliberately, TME can help family offices align equity exposure with long-term wealth objectives while potentially reducing unnecessary tax drag. The approach is especially relevant as evolving tax policy and market volatility bring new urgency to after-tax efficiency.
 

How Many Family Offices Use TME? 

TME adoption is growing but is not yet widespread. While 45% of offices already use these strategies, 30% have considered them but chosen not to adopt them, and another 26% have not yet considered them.
 

Among family offices that use TME, size influences how the strategies are structured. 
 

Larger family offices surveyed in the 2026 report tended to prefer long-only direct indexing strategies that aim to replicate an index with low tracking error. In contrast, smaller family offices with less than $1 billion in assets under management exhibited a preference for strategies that employ leverage, such as long/short 130/30 strategies.
 

By buying stocks on margin while shorting others, these leveraged strategies have the potential to generate higher levels of realized losses and, depending on manager skill, greater alpha.
 

Leveraged active risk solutions are often used to help family offices defer additional capital gains, including those associated with concentrated positions or future events such as the sale of a business. Proceeds can then be reinvested in a diversified equity strategy that employs leverage to expand tax-loss harvesting opportunities.
 

Is TME Right for Your Office?

For offices where tax drag materially impedes compounding, TME merits serious evaluation.
 

However, this approach may be less appropriate when assets are largely tax-exempt, investment structures already limit taxable realizations, or liquidity or tracking priorities outweigh tax considerations. TME may also be less appropriate for non-U.S. family offices, since its benefits generally depend on the specifics of the applicable tax regime and may not translate across jurisdictions.

Tax-Managed Fixed Income (TMFI)

TMFI strategies apply similar tax-efficient processes to fixed income portfolios. By managing bond allocations, security selection and realized gains and losses with tax consequences in mind, TMFI can help family offices enhance after-tax income while maintaining alignment with broader investment goals.
 

In practice, this could mean structuring a bond portfolio to balance taxable and tax-exempt income sources, selectively realizing losses when appropriate, and managing maturities and turnover. The goal is to help improve after-tax income and total return without materially changing the portfolio’s overall risk profile.
 

How Many Family Offices Use TMFI?

TMFI strategies are currently less widely used than TME, but there are clear signs of growth: 36% of family offices now use TMFI, and 52% plan to increase their allocation over the next year.
 

Growing appetite for TMFI may reflect a response to interest rate volatility. Periods of rate volatility can create more opportunities to realize losses on bonds that have declined in price, redeploy funds into more attractive issues, and use those realized losses to offset gains elsewhere in the portfolio.
 

Is TMFI Right for Your Office?

TMFI strategies can improve after-tax income, but they are not appropriate in every situation.
 

Important considerations include portfolio priorities, goals and construction. A tax-managed fixed income strategy may be less appropriate when a portfolio is largely held in tax-exempt entities, maximizing pre-tax yield takes priority over after-tax efficiency, or the added complexity does not justify the potential tax benefit. Additionally, this approach is generally most relevant for U.S.-based family offices, since its value is tied to the specifics of the U.S. tax regime.

Tools for an Evolving Environment

As tax policy evolves and interest rate volatility persists, family offices that integrate tax management into their equity and fixed income allocations may be better positioned to compound wealth across generations. TME and TMFI strategies are therefore becoming increasingly important tools for family offices.

Explore more data on TME and TMFI strategies in the complete 2026 Investment Insights for Single Family Offices  report, along with essential trends in family office allocation and decision-making.