Michael Batnick and Ben Carlson host Erco Atula, CEO and Chief Investment Officer of Brooklyn Investment Group, a wholly-owned subsidiary of Nuveen acquired in 2025. The discussion centers on tax-advantaged long-short separately managed accounts (SMAs), which Erco describes as one of the greatest innovations in wealth management since ETFs.

The conversation explores how these strategies combine traditional direct indexing with long-short investing to dramatically amplify tax loss harvesting capabilities. Brooklyn Investment Group, founded by Erco in 2021, serves independent advisors through a technology platform that enables systematic investing and tax management at scale across thousands of accounts.

Brooklyn Investment Group's Evolution and Nuveen Acquisition

Erco founded Brooklyn Investment Group in 2021 as a tech-powered asset manager serving independent advisors, with Nuveen acquiring the company in 2025.

The acquisition allowed Brooklyn to leverage Nuveen's distribution and client service capabilities while focusing on systematic investing and tax management technology.

Brooklyn initially launched with balanced equity-fixed income solutions before expanding into long-short strategies, which were 'always in the back of my mind' - Erco.

Long-Short Strategy Mechanics and Leverage Spectrum

Strategies range from conservative 110/10 portfolios for advisors 'dibbing the toe in the water' to aggressive 325/225 configurations limited by custodian requirements.

Cash-funded 130/30 strategies generate approximately 25% realized losses in the first year versus 10% for traditional direct indexing.

Higher leverage 250/150 strategies can produce roughly 85% of realized losses as a percentage of initial portfolio value in year one.

Tracking error increases roughly linearly with leverage - 130/30 runs 1.5-2% tracking error while 250/150 reaches 7-8% tracking error.

Primary Use Cases and Client Applications

Main use cases include liquidity events from business or real estate sales, concentrated stock diversification (especially tech positions like NVIDIA), and portfolio migration for new advisory clients.

Erco personally implemented a 275% long, 275% short market-neutral strategy after the Nuveen transaction closed in July 2025, maximizing tax loss harvesting in the remaining five months.

Legacy portfolios can serve as collateral for long-short extensions, 'turning them into productive members of the household' rather than holding static positions.

Technology Platform and Stock Selection Approaches

The platform enables daily risk management across tens of thousands of accounts, with each portfolio receiving individual attention through systematic processes.

Advisors can bring their own models for the core portfolio beta while Brooklyn provides long-short stock selection across the 2,700 most liquid US stocks.

Stock selection ranges from simple factor tilts (high quality long, low quality short) to proprietary uncorrelated alpha signals designed to avoid crowded trades.

'Economic substance' is required beyond tax harvesting - strategies must be viable without the tax management component to maintain legitimacy.

Tax Deferral Reality and Exit Strategy Planning

'All of these strategies are tax deferral strategies. We're not canceling taxes. We're deferring taxes' - Erco, emphasizing the fundamental limitation.

Harvesting losses embeds gains elsewhere in the portfolio, creating a tax liability that persists until step-up basis at death or charitable donation.

Typical client progression involves ramping up leverage for immediate tax needs, then implementing 'gain-neutral deleveraging plans' in subsequent years.

Unwinding positions too quickly after loss harvesting triggers immediate gain realization, defeating the tax deferral benefit and creating unexpected tax bills.