The Indicator from Planet Money - How the rich make money by losing money

Episode Date: September 28, 2026

Decades ago, rich Americans used to pay taxes as high as 40% on their investments. Nowadays, an obscure investment strategy is helping them slash that figure toward … 0%. Today on the show, Bloomberg reporter Loukia Gyftopoulou, tells us about this generation’s “great American tax dodge,” and the “mad genius” behind it.A Tax Strategy for the Rich Built the World’s Largest Hedge Fund - BloombergFact checking by Sierra Juarez.Your Next Listen — What’s a revenge tax?Connect with The Indicator — Sign up for The Indicator’s weekly newsletter! — Buy the Planet Money book — Find our socials, YouTube and more! — For sponsor-free episodes, subscribe to NPR+ Support public media with NPR+ and enjoy perks for over 25 podcasts like this one. This show’s perks include sponsor-free listening. Learn more at plus.npr.org. See pcm.adswizz.com for information about our collection and use of personal data for sponsorship and to manage your podcast sponsorship preferences.NPR Privacy Policy

NPR. Decades ago, the richest Americans paid taxes as high as 40% on their investments. That means if they sold a bunch of stock or their company got acquired, a good chunk of that payday would go to the government. But right now, some millionaires and billionaires are plowing their money through a tax loophole so big it could allow them to slash their taxes to zero. This is the indicator from Planet Money. I'm Waylon Wong. And I'm Adrienne Ma. Today on the show, we'll be joined by Bloomberg reporter Lucia Giftuulu. She covers investing in the wealth management industry.

And recently, she and her colleagues did a series of stories on what they call this generation's great American tax dodge. After the break, she explains how it works and tells us about the man behind it, a hot-tempered computer screen punching financial whiz who runs the world's biggest hedge fund right here in the U.S. The story of this era's great American tax dodge starts with a man named Cliff Asnus, 59 years old with a bald head and gray beard and a Captain America tattoo on his arm. Cliff worked at Goldman Sachs in the 90s and around that time also got a PhD in finance.

Cliff Asnus is a very big, bigger than life personality. That's Bloomberg reporter Lukia Giftuulu. He's, let's say, a modern. genius in a way who's found this way to help reach people slash their tax bills potentially to the extreme. Another mad genius. There's very few geniuses that are described as stable.

Yes. People who have spent a lot of time with him, credit him as one of the smartest people that have ever met. At the same time, he's got a massively short fuse. He shouts at people. He's admitted that he's during the financial crisis. He was punching through computer screens, maybe afterwards as well. I don't know.

Cliff Asnes also loves to throw verbal punches. He's known for publicly insulting fellow finance bros like billionaire Bill Ackman. And he's written a lot of Wall Street Journal op-eds, including one where he defended what he called The Working Rich. I think Ebeneuser Scrooge was a member of the Working Rich class. I think that would count. After his stint at Goldman, Cliff struck out on his own. own. He set up a hedge fund called AQR Capital Management. And for years, AQR was a pretty typical hedge fund, taking money from wealthy individuals or pension funds, investing it,

and trying to turn it into even more money. But then a few years ago, Lukia says, they made a pivot. They shifted towards something called tax-aware investing, which means what exactly? We help reach people slash their tax bills. That's what tax-aware investing means. While traditional investing is focused purely on growing a pool of money, tax-aware investing is focused on reducing how much an investor owes to Uncle Sam. One classic strategy for doing that is something called tax loss harvesting. That's when you sell off losing stocks and write off those losses to reduce your tax bill. Cliff and his team at AQR Capital took this basic strategy and complexified the hell out of it. They developed what's called a tax-aware long-short strategy, which sounds like totally.

total word salad. It basically it means that they create complicated investment portfolios purposely engineered to generate losses. They have thousands and thousands of positions, many long, many shorts. They borrow money

and they create losses. Long term, these strategies are supposed to also make you money, but they've engineered a product that can create losses that can then offset any you have to pay. To make that concrete, here's an example from Lucia's reporting. In a presentation AQR Capital gave to potential investors, they explained how their souped up version of tax loss

harvesting works. They said, if you invest $100 million with us over the next 10 years, it'll grow to $300 million, which is a pretty good return. But here's the icing on the cake. They said over that same period, the fund could incur $600 million in losses, losses which you can use to will race your tax liability on your winning investments. Grow your money and slash your tax bill. That is what AQR is promising. Who doesn't want to do that? Right?

I mean, sign me up. Oh, wait, I don't have anywhere near the amount I would need to buy it. Never mind. We'll get back to you. Yeah. AQR started offering this strategy to clients who had at least a million dollars to invest. Lekees says they exploded in popularity. They went from having $3 billion.

in these accounts to having 70 billion, and maybe more now. They stopped publishing those numbers. And to put this in perspective, outside AQR, some of the most prominent hedge funds in the world, it took them decades to raise this amount of money. We're talking about 70 billion in three years.

This is, you know, outrageously fast for anyone who knows this world. So this kind of puts a bit in perspective, how much people want something that will help them not pay their dues to the government. And with some creative accounting, Lukia says investors who use this strategy might even be able to pass on their assets to their heirs without ever incurring a tax bill. And that's why in just a couple of years, AQR capital has grown into the world's largest hedge fund. And now this strategy is in such high demand among wealthy clients that other investment firms have started offering their own similar investment products.

Lukia says it's a sign of an anti-tax mood among the rich that these funds have become so popular. But it's also interesting that this is happening during a time when there's a growing anti-billionaire, tax the rich, eat-the-rich conversation happening in politics. Policymakers in states like California, Maryland, and New York are debating new taxes on the rich. Others like Hawaii, Washington, and Maine,

recently passed a millionaire's tax. I think a lot of people would hear this and feel like it doesn't seem right that maybe this is not illegal, but these millionaires and billionaires have found a very clever way to at least skirt the spirit of the tax law by finding a loophole and then like plowing all their money through it. Do you think people would be justified in feeling that way? If you are a school teacher, you know, who doesn't have one million to invest in a tax loss strategy, and you pay your full amount in tax and somebody with a lot more money can avoid it exactly because they have more money. I think it's fair for people to wonder why. It's possible the IRS may be wondering why, too. Recently, Treasury Department officials expressed concern about what they called potentially abusive tax. avoidance strategies, although they didn't specifically call out AQR's approach by name.

And Congress could, in theory, close the loophole. Amid this uncertainty, some investment firms like Charles Schwab and Fidelity that work with AQR have pulled back on offering this type of account to new clients. And yet, Lucia thinks this isn't going away. You know, hedge funds going to hedge fund. You know, they're just going to keep making money for the clients. And if they can offer it to them, they will. and asset managers would do the same.

And then if someone comes and says, this is illegal, then they're going to have to stop it. And somebody might have to pay a lot of money for it in penalties. But until then, it's just going to keep growing. And in fact, some money managers have even begun selling this tax avoidance tool to the masses. What do you mean by masses? You mean people like you and me. I mean like instead of just pay whatever the turbo tax online thing,

tells you to pay a tax time? Well, they're not just offering it to the ultra wealthy, but maybe even the merely very wealthy. Oh, my goodness, they finally are going to catch a break. And Lukia says that could be a problem because these funds aren't without risks. Many financial advisors are pushing this to every single client, even if the clients are not right for this strategy. People can be trapped in account. They do not understand. which might cost them a lot more because these things are complicated

and you can't really get out of them whenever you want. So you're saying I just can't, you know, Robin Hood my way to tax loss riches? That'll be a follow-up episode. If you have a creative tax avoidance strategy, listen, don't keep it to yourself. Let us know. Indicator at npr.org. This episode was produced by Cooper, Katz McKim and engineered by Jimmy Keely.

It was fact-checked by Sierra Juarez. Cake and Cannon is our editor and the indicators of production of NPR.