December was a challenging month for the strategy, with the SSR Tax-Aware portfolio declining -2.8%.
Performance was driven primarily by stock selection, with smaller additional headwinds from our size and style positioning and factor interactions. The broader market itself was essentially flat during the month, contributing little to overall returns.
As shown above:
Market Return: 0.0%
Size & Style: -0.2%
Stock Selection: -2.0%
Interaction Effect: -0.6%
Strategy Return: -2.8%
While factor positioning created a modest drag, the majority of the monthly decline came from individual security selection within the portfolio.
Our portfolio continues to follow the size and style allocation guidance implemented in mid-2025, which reflects our systematic factor signals and long-term diversification objectives.
This framework defines:
Overall exposure to Large vs. SMID companies
The split between Value and Growth within each size segment
These targets evolve as factor signals change, but remain anchored to maintaining diversified exposure across market regimes.
The size signal remains weak, with smaller companies continuing to underperform larger companies on a relative basis.
The factor remains below its longer-term moving averages, indicating continued pressure on smaller-capitalization stocks relative to large-cap peers.
Within large caps, growth remains the dominant longer-term trend, though growth underperformed value during the month of December.
From a size and style perspective, performance in December was mixed across segments. Our tilt toward large-cap growth detracted from returns during the month, as growth lagged value within the large-cap universe.
Within non-large stocks:
Mid-caps currently exhibit a more neutral value/growth profile.
Small-caps continue to favor value over growth.
Importantly, our value tilts within mid- and small-cap stocks were additive to performance in December and helped offset a portion of the drag coming from large-cap positioning.
However, because the portfolio’s overall exposure to large-cap equities is materially larger than its exposure to SMID stocks, the negative impact from large-cap positioning outweighed the benefits seen in smaller companies. As a result, size and style allocation contributed modestly to the strategy’s overall underperformance relative to the broader market for the month.
To better contextualize 2025 performance, it is helpful to examine the difference between cap-weighted and equal-weighted market returns.
SPY (S&P 500 ETF) finished 2025 up approximately 18.0%
RSP (Equal-Weight S&P 500 ETF) finished 2025 up approximately 11.5%
This divergence highlights how market returns in 2025 were driven by a relatively small group of mega-cap stocks, rather than broad participation across the index.
In these environments:
Cap-weighted benchmarks can significantly outperform
Diversified, factor-driven strategies may lag when leadership is narrow
Stock selection becomes more difficult as gains concentrate in fewer names
This market structure helps explain both the recent performance gap versus traditional benchmarks and the stock-selection headwind reflected in December’s attribution.
While short-term results can vary meaningfully depending on market structure, the strategy’s long-term performance remains competitive versus its benchmark.
Compliance Disclosure:
The Size and Style Responsive Tax-Aware strategy seeks to manage after-tax returns by incorporating tax considerations into trade decisions. For example, when possible, the strategy may defer realizing short-term gains to achieve long-term tax treatment, subject to client-specific constraints and objectives. Tax impact is a factor in implementation, but it does not override the strategy’s investment objectives.
Past performance, whether actual or hypothetical, does not guarantee future performance. Investment results and principal value will fluctuate, and clients' investments, when redeemed, may be worth more or less than their original cost. This communication is exclusively for investment advisors and financial professionals and is not intended for clients or the investing public.