He taught people in the United States how to "lose money" for tax avoidance, while he himself became a billionaire.

Hoon Kim, a PhD in Accounting, once helped AQR Capital develop a novel tax-avoidance investment strategy before leaving to found Quantinno. Relying on thousands of wealth managers and their ultra-high-net-worth clients, the firm's assets under management soared from $2 billion to $700 billion in just three years.

The long-running bull market in U.S. stocks has created a tax headache for the richest group of Americans: investment returns are substantial, but there are far too few losses available to offset them. Major stock indices keep rising, and tech company founders and early employees have amassed huge fortunes through concentrated shareholdings. It is increasingly difficult for wealthy individuals to find loss-making positions, leaving them unable to use "tax-loss harvesting" to offset capital gains.

As a result, strategies designed to solve this pain point have quickly become a sought-after commodity across the entire investment industry. Wall Street hedge funds are sparing no effort to design such products, and independent financial advisors are also heavily promoting them to their clients. This approach, known as tax-aware long-short strategy, allows investors to use leverage to place additional bets on hundreds or even thousands of stocks: some positions are held long, while others are short (shorting means betting that the stock price will fall, by borrowing stocks to sell first and then buying them back later at a lower price). This innovative mechanism deliberately generates large losses on long or short positions, allowing investors to harvest these losses to strategically offset gains from other investments while keeping most of their capital in the rising stock market.

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Today, the total size of assets allocated to tax-aware long-short strategies is rapidly approaching $2 trillion, up from just tens of billions of dollars five years ago.

Headquartered in Greenwich, Connecticut, AQR Capital Management is a hedge fund and asset management firm with 750 employees and total assets under management of approximately $2600 billion, widely recognized as a pioneer of this trading strategy. Its success has attracted a host of top-tier institutions to follow suit, including asset management giants such as BlackRock, Nuveen and Franklin Templeton, as well as quantitative hedge fund peers such as Two Sigma and WorldQuant. All of these institutions have recently launched or are deploying similar "tax-aware long-short" products. However, AQR's biggest competitor is a little-known New York firm — Quantinno Capital Management. In fact, Hoon Kim, the 57-year-old accounting PhD and founder of Quantinno, worked at AQR for 12 years, during which he participated in building one of AQR's first long-short funds.

According to Quantinno's official website and public filing documents, as of March 2026, the firm had 10,600 individual accounts under its management, with assets under management reaching $484 billion, compared to less than $3 billion five years ago. Although this net asset figure has been removed from Quantinno's official website, a wealth advisor familiar with the firm's internal data revealed that in less than half a year, its asset size has further increased to approximately $700 billion. "Their success is remarkable. I have never seen such a growth rate," said Brent Sullivan, a tax analyst and founder of the industry blog Tax Alpha Insider.

In March this year, Sullivan estimated that the total net asset size of independent managed accounts (SMAs) for tax-aware long-short strategies across the market was approximately $1.5 trillion. Now he expects that the combined scale of the four top-tier institutions alone has reached about $1.7 trillion — AQR and Quantinno are leading the pack, followed by Gotham Funds and BlackRock's Aperio, with a large number of small institutions also scrambling to join this gold rush. But essentially, this race is a two-horse contest between Quantinno and AQR for market dominance, with both firms managing approximately $700 billion in this strategy. "The two are far ahead in scale," Sullivan said.

Hoon Kim declined to be interviewed for this article, but it is obvious that behind the firm's explosive growth lies strong demand from the wealth management industry: the stock market rally has generated huge returns, and high-net-worth clients' demand for advanced tax avoidance tools is growing day by day. In fact, when Hoon Kim founded Quantinno in 2018, he originally focused on tax-aware long-short hedge funds, but soon shifted to implementing the strategy in independent managed accounts, which are core service products for hundreds of thousands of wealth managers serving high-net-worth clients. Unlike traditional mutual funds or ETFs, independent managed accounts can be customized according to the risk appetite and investment objectives of each holder. The total size of retail independent managed accounts in the U.S. is currently about $4 trillion.

"We can customize exclusive strategy plans for each client," Hoon Kim said on the "Prime Alpha" podcast in 2021.

Quantinno's meteoric rise has also catapulted the low-profile quantitative expert to the ranks of self-made billionaires on Wall Street. Hoon Kim now lives in Scarsdale, a suburb of Westchester County, New York, in a residential property worth $2 million. According to Forbes estimates, his majority controlling stake in Quantinno is worth more than $1 billion; if the valuation premium offered by potential acquirers is taken into account, the actual value could be much higher. Zach Milam, vice president of Mercer Capital, a consulting firm specializing in asset management industry valuation, said: "Over the past two years, Quantinno's growth rate is unmatched in the public market. It is an extremely valuable strategic asset in the fastest-growing product track of the wealth management sector."

For Quantinno, AQR and their imitators, the core question is how long this bonanza can last.

Fidelity and Schwab, the two largest custodian institutions in the U.S., are tightening restrictions on long-short accounts, due to concerns that excessive leverage by investors will bring potential risks to their own balance sheets — after all, it is these custodian institutions that provide margin loans to investors. On the distribution side, some advisors are also beginning to be vigilant: this strategy has been over-promoted to some investors who neither understand its principles nor are necessarily able to benefit from it. In addition, taking on large amounts of debt and reinvesting the funds in the stock market may also pose risks to the broader stock market.

"This strategy has not been tested in a market downturn, and the entire category faces tax policy risks that a single government decree can change its fate," Milam said. "In the asset management industry, there are countless companies that rise fast and collapse even faster."

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Hoon Kim was born in South Korea in 1968. He completed his undergraduate studies in business at Yonsei University, one of South Korea's top universities, before coming to the United States to pursue further education. Between 1996 and 2001, he studied at Carnegie Mellon University in Pittsburgh, where he obtained a Master of Business Administration and a PhD in Accounting. During his postgraduate studies, his research focused on the correlation between accounting information, stock price valuation and asset price volatility, under the tutelage of renowned economists and accounting theorists Yuji Ijiri (who passed away in 2017) and Shyam Sunder. "In my impression, he was a very smart and hardworking student," said Sunder, the 82-year-old professor at Yale School of Management. "He was always thinking continuously and open to new ideas."

In 2001, Hoon Kim started his career at Mellon Capital Management, the index investment arm of Mellon Financial (now part of BNY Mellon), where he led its quantitative equity research team. In 2005, he moved to hedge fund AQR. AQR was co-founded in 1998 by Cliff Asness, David Kabiller, Robert Krail and John Liew. Its core research originated from the quantitative team Asness led when he worked at Goldman Sachs. AQR initially operated as a traditional hedge fund serving institutional clients, but after the financial crisis, it shifted to products more suitable for the retail market, using computer models to achieve hedge fund-like returns at lower costs, and packaging these strategies into mutual funds that could generate quantitative alpha, driving the firm into a period of rapid growth.

By 2012, Hoon Kim had begun to participate in managing AQR's global stock selection team. In the same year, he helped launch AQR's defensive stock mutual fund series — three pure long funds designed to reduce risks. In 2016, he became the portfolio manager of AQR's Long-Short Equity Fund, an open-ended mutual fund. Later that year, Hoon Kim helped launch a new hedge fund, which was also one of AQR's earliest tax-aware long-short funds. "This idea is brilliant, because if you think about it carefully, we can achieve tax-loss harvesting no matter what the market environment is," he explained the principle of the strategy on the podcast. "No matter whether stocks rise or fall, there is room for operation."

In early 2018, Hoon Kim left AQR and founded Quantinno later that year. He poached Paul Giordano and Albert Kim from his former employer's global stock selection team, and also brought in business development expert Glenn Shirley to oversee investor relations, as well as Todd Saunders, a veteran with 30 years of hedge fund experience who was his old colleague at Mellon Capital. The four joined as executive partners in 2018 and hold minority stakes in the firm. Filing documents show that Tishman Capital Partners, the family office of Manhattan-based real estate developer Tishman, was Hoon Kim's first anchor investor, entrusting nearly $70 million in assets under management to Quantinno.

But Hoon Kim soon realized that the real opportunity lay in the under-explored market of registered investment advisors and wealth managers, whom Quantinno could attract with customizable independent managed accounts. In 2021, Quantinno launched the DEALS platform, allowing advisors to easily use its long-short account services. Around the same time, Fidelity Investments, the largest U.S. brokerage, agreed to set up its first tax-aware long-short account, reportedly at the request of one of Quantinno's clients who was also a Fidelity customer. Subsequently, Fidelity lowered the investment threshold for this strategy, driving a wave of third-party advisors to pour in, all hoping to help their clients realize tax deferral. AQR followed closely behind, launching Flex, a long-short independent managed account platform for registered investment advisors, in 2022. Currently, the minimum investment threshold for this strategy at both firms is $1 million.

"The independent managed account model is particularly well-recognized in the advisor channel," said tax analyst Sullivan. "They need scalable customized services, and the product form of independent managed accounts exactly meets this demand."

The concept of traditional tax-loss harvesting is not complicated: investors sell falling stocks to lock in paper losses, and at the same time buy alternative assets with sufficiently high differentiation, using these losses to offset gains from other investments. But over time, it becomes difficult to harvest losses in a pure long portfolio: all loss-making positions have been sold, leaving only profitable positions in the portfolio. The industry refers to this phenomenon as "rigidification", which has become a widespread problem in this bull market that has lasted for nearly four years.

For example: suppose you are an employee of NVIDIA, and you now hold $10 million of the company's stock with an extremely low cost basis, accumulating huge unrealized gains. You want to gradually cash out, but you neither want to pay high capital gains tax nor miss out on the compounded returns of the stock market. This is where long-short independent managed accounts come into play. In a typical 130/30 long-short portfolio, the $10 million NVIDIA stock you hold will serve as the initial principal and collateral. The portfolio manager will use margin loans to additionally buy $3 million in long positions, and at the same time short $3 million in other stocks. The resulting structure will have approximately $13 million in long exposure and $3 million in short exposure, with a net market value of still $10 million. As you gradually sell your NVIDIA stock, the losses generated from both the long and short sides can be used to offset gains; if there are other unrealized gains in your investment portfolio that you want to monetize, such as private equity shares or mutual funds in a brokerage account, these losses can also be put to good use.

For more aggressive investors, there are other options: the 200/100 strategy amplifies long exposure to $20 million and short exposure to $10 million; the 300/200 strategy reaches $30 million in long exposure and $20 million in short exposure — total exposure is 5 times the original principal. Accounts of this version also have a higher minimum investment threshold.

The ideal end state of this strategy is that the investor passes the account on to their heirs after death. According to the tax law provision commonly known as the "stepped-up basis", the tax base of inherited assets is usually determined based on the fair market value of the assets at the time of the decedent's death, so the capital appreciation of the assets during the lifetime of the original holder generally does not need to pay capital gains tax. In a long-short account, investors can not only defer taxes on the original collateral (the NVIDIA stock in this example), but also enjoy tax deferral on the appreciated stock positions bought with leveraged funds.

But without this stepped-up basis rule, the long-short strategy only defers the payment of capital gains tax, rather than making it completely tax-free (Cliff Asness, head of AQR, emphasizes that this distinction is crucial). In the final analysis, the core of the long-short strategy is to offset taxes while allowing the rest of the portfolio to earn higher returns. However, if investors suddenly need cash, they may have to close their positions early, thus recognizing this taxable gain. "This could be one of the longest-term investment strategies you have ever seen in your life," said Aaron Brachman, an advisor at Steward Partners, which has $1.4 billion in assets under management. He advises clients that they are only suitable for building a long-short strategy if they are prepared to hold it for life.

In other words: "You are deeply tied to the portfolio manager," said Matthew Lusins, an advisor based in Jackson Hole, Wyoming, who once worked at Jim Simons' family office. "You can't easily transfer an account with 2,000 positions to another institution."

There are also fee costs. In addition to the fees paid to the sub-advisor (Quantinno's fee rate is approximately 0.45% of assets), investors also have to bear the financing costs paid to the custodian institutions, usually between 50 and 150 basis points (that is, 0.5% to 1.5% of assets); there are also transaction costs, which are small per transaction but add up considerably as the portfolio needs to be continuously rebalanced. These fees can add up to as much as 3% of assets under management, putting pressure on firms like Quantinno and AQR — they must generate pre-tax alpha in the stock selection process to cover these costs.

"You have to find a way to outperform the market to offset these disadvantages," Lusins said. He believes that some clients are suitable for long-short investing, but also points out that many people who are sold this product are better off not buying it. "I'm worried that everyone is rushing into this space," he said. "This is always the case with innovative strategies: people flood in, returns get diluted, and in the end many people will regret buying them."

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Quantinno's next step will verify two major issues: first, whether the demand from wealthy investors can outpace the tightening of risk controls by account custodian institutions; and second, whether this red-hot strategy can survive a bear market.

Over the past year, the two largest U.S. custodian institutions have poured cold water on this boom. Fidelity, which once sparked the long-short independent managed account craze, stopped opening most new accounts in December 2025 and raised financing costs for some existing clients earlier this year. Fidelity provides custody and clearing services for more than 3,400 advisor firms, and as of March, 52% of Quantinno's client assets are custodied at Fidelity.

Schwab, which only entered this business in 2025, also custodied 32% of Quantinno's assets as of March. Schwab serves more than 16,000 registered investment advisors, and in recent months, like Fidelity, it has tightened its rules: the leverage cap for new accounts is set at 200% long and 100% short, and a limit is also set for each advisor's allocation proportion in this strategy, at 30% of the total client assets they custodied at Schwab.

If Quantinno needs to change custodian institutions, it is not without options. Pershing Advisor Solutions LLC, under BNY Mellon, is one of the alternatives, and as of March, the institution custodied approximately 13% of Quantinno's assets. New entrants in the long-short custodian market such as Interactive Brokers, Apex Fintech Solutions and Goldman Sachs are also on the candidate list.

Although a rapid and deep bear market will certainly impact the growth of tax-aware long-short accounts, the advisors interviewed by Forbes are confident in Quantinno's leverage management capabilities and recognize its willingness to customize solutions according to the situation of each client.

Matt Fitzsimmons is one of these satisfied clients. He said: "From the very beginning, their performance has met my expectations." Fitzsimmons is the managing partner of Watchman Group, a registered investment advisor firm with $700 million in assets under management, headquartered in Plano, Texas, with clients across the United States.

Advisors like Fitzsimmons are the key gatekeepers determining Quantinno's future. If this quantitative firm can retain these advisors, its prospects will be limitless. After all, people's demand for paying less taxes will never be satisfied — even if it means using their own money