Lead-Lag Live
Welcome to the Lead-Lag Live podcast, where we bring you live unscripted conversations with thought leaders in the world of finance, economics, and investing. Hosted through X Spaces by Michael A. Gayed, CFA, Publisher of The Lead-Lag Report (@leadlagreport), each episode dives deep into the minds of industry experts to discuss current market trends, investment strategies, and the global economic landscape.
In this exciting series, you'll have the rare opportunity to join Michael A. Gayed as he connects with prominent thought leaders for captivating discussions in real-time. The Lead-Lag Live podcast aims to provide valuable insights, analysis, and actionable advice for investors and financial professionals alike.
As a dedicated listener, you can expect to hear from renowned financial experts, best-selling authors, and market strategists as they share their wealth of knowledge and experience. With a focus on topical issues and their potential impact on financial markets, these live unscripted conversations will ensure that you stay informed and ahead of the curve.
Subscribe to the Lead-Lag Live podcast and follow @leadlagreport on X to stay updated on upcoming live conversations and to gain exclusive access to a treasure trove of financial wisdom. Don't miss out on this incredible opportunity to learn from the best and brightest minds in the business.
Join us on this journey as we explore the complex world of finance and investments, one live unscripted conversation at a time. Be sure to like, comment, and share the Lead-Lag Live podcast with your network to help others discover these invaluable insights.
Stay tuned for the latest episode of the Lead-Lag Live podcast, and remember to turn on notifications so you never miss a live conversation with your favorite thought leaders. Happy listening!
Lead-Lag Live
Avoiding the Tax Man: Bruce Lavine on how to Diversify Without Getting Burned
In this episode of Lead-Lag Live, I sit down with Bruce Levine, COO and Head of ETFs at Astoria Portfolio Advisors, to talk about one of the biggest problems facing investors today — how to diversify out of concentrated stock positions without triggering massive tax bills.
We dig into the upcoming launch of the LCOR ETF, built around the innovative 351 exchange structure, and how it can help investors turn overexposed gains into a diversified, actively managed portfolio.
In this episode:
- Why “yesterday’s winners” rarely lead the next decade
- How the 351 exchange works — and who can benefitThe tax advantage that only comes once: October 1 launch date
- Why diversification matters, even for the biggest tech winners
- How LCOR aims to beat the S&P 500 with a large-cap core strategy
Lead-Lag Live brings you inside conversations with top financial minds shaping markets in real time.
Subscribe for more interviews, insights, and raw takes that cut deeper than the headlines.
Right now we're set up with Schwab and Fidelity and Pershing as our custodians, so if you have an account with one of those, that's useful. It's about a $500,000 minimum basket size to participate and pretty much people's taxable money or trusts are good structures for participating.
Speaker 2:Hi everyone and welcome back to Lead Leg Live. I'm Melanie Schaefer, your host of the show, and today I'm joined by Bruce Levine, chief Operating Officer and Head of ETFs at Astoria Portfolio Advisors. Bruce, it's great to have you here.
Speaker 1:Great to be here, melanie, thank you.
Speaker 2:So let's start with a problem a lot of investors are facing. They've built up large multi-year gains in individual stocks, but they're kind of stuck. They want to take profits but don't want to trigger a big tax bill. Why is that such a common, you know sort of trap? What options do?
Speaker 1:you think they have. Yeah, it's been a really interesting problem lately. You know you've had back to back 25% kind of years and in some of the tech stocks the gains have just been astronomical, you know two to 500% kind of gains over a decade, let's say. And so investors are sometimes getting a little queasy with the valuations, with the concentrations, but when it comes to dealing with it, you know, other than paying the tax man, which nobody likes to do your options are a little bit limited. And you know that's what we were experiencing with our own clients at the start of the year and we were looking at all kinds of different strategies option hedging and things like that. And then we heard about the 351 fund and this is a really interesting product, that an interesting structure that solves this problem, you know, and in a way that no other tax management strategy does so. So we file for a prospectus to do a fund and we're out educating about the benefits of a 351 to people.
Speaker 2:Yeah. So I mean, we've seen this sort of play out before high flying stocks that eventually crash. Some examples might be like Kodak, GE, et cetera. Why do you, why do some of the investors ignore diversification in the first place, even when history seems to continue to warn otherwise?
Speaker 1:Yeah, I mean there's a lot of you know things about investing that are emotional and you know when you have big winners, parting with them for some people can be emotional, but but, as you just said, history bears out that when you have the chance to diversify, you should. It's very, very rare. When you look at the leaderboard decade over decade, company wise, you know it's very rare that yesterday's winners are tomorrow's winners. There are some exceptions, but you know there's plenty of Cisco's and Lucent's and IBM's and others.
Speaker 2:You know, to make the point, yeah, and so, going back to what you just said a minute ago, that you know the 351 fund offers a way to diversify without incurring taxes, Can you explain sort of very simply how this structure works?
Speaker 1:Yeah, it's similar.
Speaker 1:A lot of people are familiar with a 1031 in real estate where you transfer one asset for another and you don't have a change in your cost basis.
Speaker 1:In a 351, and 351 is a section of the tax code around corporate formation you transfer a basket of securities for a different basket of securities and the basket you transfer in and when I say you, it's each household assembles their own basket.
Speaker 1:Each end client and everyone will have a different looking basket and if you meet the diversification guidelines required for running a 40-act fund, then you can get the ETF shares in return. The two main rules no single stock can be more than 25% of the portfolio and the top five names can't be more than 50% and 50%. So if you imagine you have I don't know three names that are making up 40% of your portfolio, you could give us those three names and another 60% of other stuff and you'd get back a diversified portfolio where your top weighting will be, you know, seven or 8%, so and it'll be a much more diversified basket. Ultimately, this fund run has like 100 stocks, be, you know, 7% or 8%, and it will be a much more diversified basket. Ultimately, this fund run has like 100 stocks and you know a lot of people have much more concentrated positions than that.
Speaker 2:And the launch is October 1st, right Q3?.
Speaker 1:Yeah, October 1st. Our fund is a large cap fund designed to be part of your core, so the ticker is LCOR. We call it L-Core because it's the large core and it's a quantitatively managed active management designed to outperform the S&P 500. It's based on a strategy that's been run as a separate account for over 12 years with very good results. It's been run by a guy named Pankaj Patel, a very sharp guy who's on our investment committee, so we're excited to bring it in an ETF form.
Speaker 2:So the tax benefits are they? Can people take advantage of that at any time, or is the launch? Yeah, great question.
Speaker 1:So it's really just at launch that you can access the tax benefits. It's a one-time thing and again the tax code goes back to corporate formation. Then, the day before we launch, the individual holdings are going to go away and they're going to be replaced with shares of Elcor, and so on day two, this is going to look like any other ETF in the market. As a matter of fact, there have been a few of these launched and you wouldn't know. You couldn't identify a 351 in hindsight from anything going on in the secondary market. So it's pretty interesting.
Speaker 2:Yeah, that's really interesting and so can anyone participate, or are there rules that investors need?
Speaker 1:So right now we're set up with Schwab and Fidelity and Pershing as our custodians. So if you have an account with one of those, that's useful. Schwab, like if you're a retail investor, you probably need to come through Astoria and set up an agreement with us prior and then, of course, we can use those same custodians. It's about a $500,000 minimum basket size to participate and pretty much people's taxable money or trusts are good structures for participating. We're not typically allowed to take corporate assets.
Speaker 2:Okay, and so does every investor who contributes, offer or come with a sort of a unique portfolio follow into the ETF. I mean it could end BDA, berkshire, jp Morgan, whatever they're concentrated in.
Speaker 1:Yeah, everyone comes in with whatever it is that they want in kind. Now, ours is a large cap fund, so it's got to be large cap stocks or large cap ETFs. Etfs are great because they come sort of pre-diversified so they really help in terms of meeting the diversification requirements. So they really help in terms of meeting the diversification requirements. So, just to give you an example, a good basket to give us would be Apple for 25% and the sector financials spider for 75%. Okay, and that's a diversified basket. If you tried to give us 25% Apple and 75% spider, we have to look through the spider which holds 5% or 6% or 7% Apple, and then we have to look through this spider which holds five or six or seven percent apple and then we have to make it adjust your apple lower. So we look through the etfs, but they're they're good collateral. Um, what we can't take are mutual funds, bonds, uh, international stocks, small cap stocks, cryptos. It's pretty much got to be what we wrote down in the prospectus, which is a large cap product.
Speaker 2:Right, Okay, so the only way that sort of people would have any maybe crypto exposure to would be in some of those like MSFT or something where yeah, maybe Coinbase or something as a security, but no direct crypto holdings? Yeah, so who are you exactly looking for to bring into this?
Speaker 1:Yeah, so we're talking to advisors and it's really their end clients, and these are people that have just been holding securities for a long time and if your advisor's done well for you and you've been invested in a lot of these stocks for a long time, you tend to have pretty big positions.
Speaker 1:But they do get a little bit stuck, they get a little uncomfortable. Some of them are, to some extent, yesterday's winners Not all of them, obviously, but an example would be people have a lot of Coca-Cola, they have a lot of Johnson Johnson or Procter Gamble that they've been accumulating for years and perfectly good companies. But maybe you're interested in the AI revolution, right, and so you want to get out of what I'd call legacy positions and get into a portfolio that's always looking at what's available today. And then, of course, people are just on a percentage of their portfolio can be very overweight tech stocks. If you just bought, you know Apple and Amazon and Nvidia and a few others Palantir, you know you might find a portfolio that's 60 plus percent. You know value in tech stocks that are really high multiples and you know you might, just from a prudence standpoint, want to change your asset allocation.
Speaker 2:Right. So moving those equities into an ETF like this sort of gives someone more of an opportunity to place their money maybe where the economy is going.
Speaker 1:Yeah, I think so. You know, in many cases we're going to own many of those same names. Right, we're going to own NVIDIA and Microsoft, just not to the great extent that they're owned, you know, in concentrated portfolios.
Speaker 2:Right. So, Bruce, just before we go, where can people go to learn more about Elcor and connect with your team?
Speaker 1:Yeah, if you come to storyadvisorscom, there's a way to navigate. We have a landing page around this W51 that's got some information on it. You can certainly reach out to me at, you know, blevine, at AstoriaAdvisorscom, and yeah, we'd love to talk to you about this. It's a really interesting experience to talk with people because the education level is relatively low in aggregate, but people are starting to get wind of it and when they do, they go, wow, my client has that issue. I can really see using this. So that's what we're experiencing right now.
Speaker 2:Yeah, it sounds like a really interesting time coming up ahead and not a lot of time until the launch, so people really need to get on it now. Yeah, absolutely, well, I mean. Thanks so much for joining me. Everyone else be sure to like, share and subscribe for more episodes of Lead Leg Live. I'm Melanie Schaefer and I'll see you next time.
