AQR TAX-AWARE Delphi Plus Strategy - HEDGE FUND

AQR (Applied Quantitative Research), is the leading quantitative fund family behind a ton of factor-based investing) launched the TA Delphi Plus Strategy as a hedge fund in 2021, but the quantitative strategy go back to their research from 2011.

The minimum investment for AQR TA Delphi Plus Strategy is $1,000,000 or $1mm.

Qualified Purchaser (QP) Requirement:  A “qualified purchaser” is an individual or a family-owned business that owns $5 million or more in investments. The term “investments” does not include a primary residence or any property used for business.

The lockup period is one year and then distribution requests are quarterly.

An investment in this hedge fund should be considered a long-term illiquid investment that is made with after-tax brokerage assets to offset ordinary income taxes through the Schedule K-1 Partnership.

Glover Park Wealth Management, LLC is a SEC registered investment adviser (RIA) with access to the AQR Tax-Aware Delphi Plus Strategy Hedge Fund. The AQR TA Delphi Hedge Fund strategy can only be purchased through a registered investment adviser (RIA).

Charles Schwab & Co., Inc. is the third-party custodian of client assets for Glover Park Wealth Management, LLC.

The AQR Tax-Aware Delphi Plus Strategy is a combination of two core AQR approaches:

• Delphi Long-Short Equity: A systematic, quantitative strategy that invests long in undervalued, high-quality, low-beta stocks (e.g., attractively priced companies with stable characteristics) and short in overvalued, low-quality, high-beta stocks (e.g., expensive or risky companies).

• Managed Futures (or Trend-Following) Elements: Incorporates alternative exposures like systematic trend-following across equities and other assets to enhance diversification and risk management.

How Does the QR TA Delphi Plus Strategy It Help Reduce Income Tax?

The strategy's primary innovation lies in its tax-aware implementation, which goes beyond conventional capital gains tax-loss harvesting (e.g., offsetting stock sales). Instead, it generates ordinary losses—a rarer and more valuable type of tax deduction—that can directly offset ordinary income, such as wages, business profits, or short-term investment gains. This is particularly beneficial for high earners in the top federal and state income tax bracket (up to 37% for ordinary income vs. 20% for long-term capital gains).  Please consult with your CPA or Tax Advisor - Glover Park Wealth does not provide tax advice.

Key Mechanisms for Tax Reduction:

• Ordinary Losses from Active Trading:

• The long-short structure creates frequent trading opportunities, allowing the fund to realize losses on short positions or underperforming longs without selling core holdings. These losses are classified as ordinary (short-term) losses due to the high turnover in derivatives, options, and short sales using Notional principal contracts (NPC).

• Unlike capital losses (limited to $3,000 annual offset against ordinary income, with excess carried forward), ordinary losses can fully offset ordinary income dollar-for-dollar in the year realized, potentially saving 37%+ in federal income taxes.

• Pass-Through Structure:

• As a partnership, tax items (gains, losses, etc.) "pass through" directly to investors via Schedule K-1 forms. Investors report these on their personal
• returns, enabling immediate use of losses against other income sources.

• Leverage and Scale:

• The strategy uses leverage to amplify notional exposure, increasing the volume of trades and thus the potential for loss harvesting. This can generate losses exceeding the fund's net performance, creating a "tax alpha" buffer. For example, even in up markets, shorts can produce deductible losses.

• Lifecycle Tax Efficiency:

• Over time, the fund builds "built-in gains" from performance, but unwinding can be managed tax-efficiently (e.g., gradual risk reduction over years). Research from AQR shows that post-liquidation, the after-tax value can potentially exceed non-tax-aware benchmarks due to deferred or offset taxes.

• Tax Savings Example on $1mm of Income: For a top-bracket investor with $1 million in ordinary income, $300,000 in fund-generated ordinary losses could reduce taxable income by that amount, saving approximately $111,000 in federal taxes (plus state taxes).  Hypothetical example of a 30% ordinary income loss. ($300,000 x 0.37% Federal Tax) = $111,000

• Consult with your CPA or EA - Glover Park Wealth does not offer tax advice.

• Eligibility and Risks: Minimums start at $1mm, and it's illiquid with lockups. Investment returns are not guaranteed.  

• Past performance is not indicitative of future results.

• This strategy exemplifies AQR's broader "tax-aware alternatives" suite, blending hedge fund returns with tax optimization to compound wealth after taxes.

The AQR Flex strategy is systematic, powered by AQR's 25+ years of factor models (value, momentum, quality, etc.), it's a quant-driven market strategy that was built to chase pre-tax alpha while using tax-aware portfolio harvesting.

The goal of the TA Delphi Plus Strategy is to help you compound after tax wealth.

If you are a Qualified Purchaser (QP) with an investment portfolio, liquid assets, or outside investments with over $5,000,000 and would like to invest in the TA Delphi Plus Strategy Hedge Fund, schedule a meeting with Glover Park Wealth Management, LLC today.