Short seller targets AQR backer over tax-loss harvesting

A short seller is taking aim at the more than $1 trillion that’s invested in strategies that reduce taxes for the rich — putting one of the U.S.’ most staid money managers in its crosshairs.

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Orso Partners has amassed a bet against Affiliated Managers Group Inc., the $813 billion investment firm that backs Cliff Asness’ AQR Capital Management, according to a letter to investors seen by Bloomberg. AQR has been at the forefront of building out an ecosystem of trades — often called tax-aware long-short strategies — that has sprung up recently as Wall Street rushes to help wealthy Americans deal with taxable gains after years of rising markets.

That ecosystem has come under fire in recent months, with the Treasury Department poised to increase oversight of at least one of the tactics.

AQR’s recent growth “is built on regulatory arbitrage that faces immediate scrutiny,” Orso portfolio manager Nathan Koppikar said in a letter to investors. “The most direct way to play the inevitable fallout” is by wagering against Affiliated Managers, he said.

AQR and Affiliated Managers didn’t reply to messages seeking comment.

Tax-aware long-short strategies aim to minimize levies by holding winners for longer and harvesting losses from poorly performing stocks. More than $1 trillion is now invested across a multitude of tax-optimization approaches that rely on hedge funds, exchange-traded funds and individual accounts.

AQR has been touting its tax-optimizing products since at least 2024, boosting assets in such strategies 10-fold in two years to about $57 billion. The firm’s assets jumped to $189 billion at year-end, increasing by a record $75 billion in 2025.

Affiliated Managers reported $51 billion of net inflows last year, representing a 36% annualized growth rate primarily driven by AQR, the firm said during a February conference call.

Given its “strong performance, ongoing innovation and differentiated expertise,” AQR will likely contribute more than 20% to Affiliated Managers’ 2026 earnings, Chief Financial Officer Dava Ritchea said on the conference call.

AQR’s tax-aware strategies are, in some cases, using leverage or complicated derivatives instruments to create steep trading losses, a practice that could draw the attention of the Internal Revenue Service, according to Koppikar. 

“This aggressive tax positioning is built on a foundation of regulatory arbitrage that is highly vulnerable to IRS scrutiny,” he wrote.

Fears are mounting that such strategies will soon struggle to attract new flows after Fidelity Investments in February began restricting clients from opening new long-short separately managed accounts.

“When the regulatory hammer falls, the resulting hit to AQR’s AUM and fee streams will be severe,” Koppikar wrote. “That impairment will flow directly through to AMG’s bottom line at a moment when AQR represents a growing and increasingly concentrated share of their earnings.”