A short-selling campaign aimed at Wall Street's "tax avoidance business" is targeting a major asset management giant with a market value of tens of billions of dollars.
According to a recently obtained investor letter, the short-selling firm Orso Partners has established a short position in Affiliated Managers Group (AMG). AMG is an investment company overseeing $813 billion in assets, with holdings that include AQR Capital Management, founded by Cliff Asness.
Orso's rationale is straightforward: the core engine behind AQR's rapid growth in recent years—its tax optimization strategies—faces a direct threat from impending regulatory tightening. Should new regulations be implemented, AMG's profits would be the first to suffer.
Following the report, AMG's stock price fell by as much as 1.7% during the trading day to $294.28, completely erasing an earlier intraday gain of up to 2.9%.
How large is this "tax avoidance business"?
In recent years, sustained gains in the U.S. stock market have allowed wealthy investors to accumulate substantial taxable profits. This led to the rise of products on Wall Street known as "tax-aware long-short strategies," specifically designed to help high-net-worth clients legally reduce their tax burdens.
The operational logic is not complex: hold profitable stocks for the long term to defer taxes, while actively selling losing stocks to "harvest losses." These losses are then used to offset other gains, thereby reducing the current tax bill.
Such strategies have now been rolled out in various forms, including through hedge funds, ETFs, and separately managed accounts. The total scale of these related strategies has surpassed $1 trillion.
AQR is a leader in this field. The company has been aggressively promoting its tax optimization products since at least 2024, with assets under these strategies growing tenfold over two years to approximately $57 billion. In 2025, AQR saw a record annual asset increase of $75 billion, bringing its total assets under management to $189 billion.
How important is AQR to AMG?
This is the core logic behind Orso's short position on AMG.
AMG reported net inflows of $51 billion last year, a 36% year-on-year increase. During a February earnings call, AMG indicated that this growth was "primarily driven by AQR."
AMG's Chief Financial Officer, Dava Ritchea, stated on the same call that, thanks to AQR's "strong performance, continuous innovation, and differentiated expertise," AQR is expected to contribute over 20% of AMG's profits in 2026.
In other words, AQR has become an increasingly concentrated and critical part of AMG's profit structure. This also means that if AQR's core business is impacted, the financial effect on AMG would be amplified.
Where exactly does the regulatory risk lie?
Orso's portfolio manager, Nathan Koppikar, stated bluntly in the letter that some of AQR's tax optimization strategies use leverage or complex derivative instruments to generate large trading losses, a practice that could attract scrutiny from the Internal Revenue Service (IRS).
"This aggressive tax positioning is built on regulatory arbitrage and is highly vulnerable to IRS review," he wrote.
Signs of regulatory pressure are already emerging. The U.S. Treasury Department is reportedly preparing to strengthen oversight of at least one category of related strategies. Meanwhile, Fidelity Investments began restricting clients from opening new long-short separately managed accounts in February—a move interpreted by the market as a signal that the ability of such strategies to attract new capital may already be constrained.
Koppikar wrote in the letter, "When the regulatory hammer falls, AQR's assets under management and fee revenue will suffer significantly. This damage will directly impact AMG's bottom line at a time when AQR represents an increasingly large and concentrated share of its profits."