For most retail investors, end-of-year investing requires a quandary. If you’re facing some losses in your portfolio, you can sell and get a tax break. This is known as “tax-loss harvesting” and is both legal and commonly done throughout America.

There’s just one problem—what if your investment goes up while you aren’t holding it? For instance, imagine an investor is down 3% on a $100,000 investment in the S&P 500 SPDR ETF (SPY). She can sell for a $3,000 write-down on taxes—but what if the ETF goes up 5% while she isn’t holding and before she can legally buy the fund back? (There is a 30-day waiting period before you can re-enter a tax-loss harvesting sold investment.) That’s a real loss of more than $2,000, since she wasn’t saving $3,000 from that $3,000 tax write-off.

Thus tax-loss harvesting is an active expression of a view on the market and on a particular security. It is a speculation on short-term price movements, which are almost always unpredictable.

This is how institutions are different in a good way. Now let’s imagine a fund that has $100,000,000 invested in the S&P 500 SPDR ETF (SPY). The fund is down 3% on that investment. The fund can sell that $100m holding for a $3,000,000 write-off and then immediately purchase shares in the 500 S&P 500 companies with that $100m. Thus exposure to the market is kept constant while the tax loss is still taken advantage of.

Not only can institutions do this at the end of the year, but they can do this and similar, more complicated portfolio maneuvers throughout the year. This is why very large funds can be “tax advantaged”. Simply put, they’re optimizing the portfolio exposure not only for the biggest market returns but also for the best tax advantage they can get.

Suddenly, active investing and investing in large funds makes a lot more sense. Imagine a fund that could optimize its tax exposure to return 90% of the S&P 500’s capital gains at a 0% tax rate? While it would take a lot of skill and luck, it isn’t impossible—and some funds strive to do just that.

It also means that employees of funds need to focus on more than just getting the best possible investment return. They also need to look at unrealized losses, tax consequences of the fund, and alternative investment opportunities. They also need to think about how ETF exposure and comparable assets can best be used to optimize the fund’s tax consequences.

This can get very messy, which is why a bit of accounting, some statistics, and a lot of knowledge about the tax code are helpful for aspiring financial professionals. It’s also why the tax advantages tend to go to the bigger investors in a world where more people are managing their own investments in low-cost brokerage accounts.