Wealthy investors burned in private credit are already chasing the next hot thing in alternative assets: infrastructure finance. @pauljdavies says they haven't learned their lesson (via @opinion)

Wealthy investors now have $170 billion in a strategy designed to generate tax losses. Four years ago, it was $2 billion. CNBC wrote about it this week. It's called tax-aware long-short investing, and if you're sitting on a big stock gain, your wealth manager may have already brought it up. I read the article and thought about pairing it with Opportunity Zones. One generates capital losses. The other gives you five years before a capital gain becomes taxable. And along the way, you move some of your wealth from a concentrated stock position into real estate. 🔷 What the account does You've probably heard of tax-loss harvesting. Sell investments that are down and use the losses to offset gains on investments you sell at a profit. The problem is that after years of rising markets, you may not have enough losers. A tax-aware long-short account owns stocks and also shorts other stocks. When stocks rise, the shorts can produce losses. When stocks fall, the stocks it owns can produce losses. The manager closes losing positions, books the losses, and replaces them while trying to maintain the account's intended stock-market exposure. You can fund the account with appreciated shares without selling them first. As losses become available, the manager can use them to offset gains from selling down your concentrated position. A dollar of capital loss offsets a dollar of capital gain. How much the account generates, and how quickly, depends on the strategy and the market. 🔷 Where Opportunity Zones fit Normally, if you sell appreciated stock this year, you need losses available this year to offset the gain. An Opportunity Zone investment changes the calendar. Under current IRS guidance, you can sell stock in late 2026 and invest the gain in a Qualified Opportunity Fund in January 2027, provided you're within the 180-day window. The gain stays deferred for five years. At the five-year mark, 10% is forgiven. Now you have until 2032 to plan around that gain, while the money is invested in a real estate project. I joke that if you ask 10 CPAs whether they'd rather have a client's tax bill coming due next April or five years to plan for it, all 10 will take the five years. Give them a loss-generating account to work with during those five years and you can see why this pairing interests me. 🔷 The math You own $10M of Nvidia with a $1M basis. You want to diversify into both other stocks and real estate. Sell $2.5M of Nvidia in late 2026. Those shares have $250K of basis, leaving a $2.25M gain. Invest the $2.25M gain in a QOF in January 2027. The $250K of basis is yours to keep. Recognition of the gain moves to 2032. Contribute the remaining $7.5M of Nvidia to a tax-aware long-short account without selling it. Over the next five years, the manager seeks to generate losses and uses some to offset gains as it sells down your remaining Nvidia. Unused capital losses can carry forward. Then the OZ gain comes back. After the 10% reduction, you have $2.025M of taxable gain. At a 23.8% federal rate, that's about $482K in tax before loss offsets. If you have $1M of available capital losses, the bill falls to about $244K. If you have $2.025M of available capital losses, the federal tax on that original sale is zero. The actual tax bill will depend on how much capital loss you have available in 2032. And losses already used to sell Nvidia aren't available again in 2032. 🔷 The money wasn't sitting still The $2.25M was invested in real estate. Hold the qualifying OZ investment ten years and its appreciation can be tax free too. Meanwhile, the long-short account is working to diversify the remaining Nvidia into a broader stock portfolio. You started with one company. You're moving toward ownership in many companies and a real estate investment. 🔷 The trade-offs Long-short accounts charge fees, use leverage and short positions, and cannot promise a particular amount of losses. Your remaining Nvidia can fall while you're waiting to sell it. Harvesting losses generally defers tax. Embedded gains remain in the account, and unwinding it can trigger a bill. The OZ portion is a long real estate hold. You can't sell a quarter of an apartment building when you need cash. If the losses aren't there in 2032, you need another source of money to pay the tax. And the tax benefit doesn't save a bad deal. Pick the building first. If you're sitting on a large stock gain, ask your CPA and wealth manager to model the combination. This is a tax post from a guy who builds apartments.