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Isn’t RenTech’s total return something like 35% annually over decades? Seems like tax savings could account for at most one year of that.
by djakjxnanjak 8y ago
Isn’t RenTech’s total return something like 35% annually over decades? Seems like tax savings could account for at most one year of that.
- chollida1 8y agoNo, assuming all their trades are short term, probably not correct, and assuming this basket option allows them to make short term trades look like long term. then they are saving the long term minus the short term rate each year, so 40% - 25% = 15% So this saves them, or makes then an additional, 15% each year on taxes. So a 35% gain each year becomes a 20% return each year. That's pretty darn significant and if true makes their returns fall in line with many other of their peers, which also means they no longer look like the superstar fund that some people make them out to be.
- djakjxnanjak 8y agoI don’t think the math works that way. Suppose your return is 35% after paying the long term tax rate. This implies your pre-tax return was .35/(1-.25) = 46.66. Now instead pay the short-term rate and get 46.66 * (1-.4) = 28%. So the return drops from 35% to 28%, which is still mind-boggling (even 20% over decades would be extremely impressive).
- chollida1 8y agoYes your right, you'll even notice I made up the tax amounts as I was on my phone. The point I was trying to make is that the tax rate does significantly affect the returns and once accounted for puts them back in line with some of their peers if account for this.