How should I think about costs vs. potential tax savings of Cache Long/Short?

Don’t compare this to an index fund. The relevant comparison is ongoing costs versus avoided taxes.

If you sell a highly appreciated position outright, you may owe 30%+ in combined taxes immediately. That’s a permanent reduction in invested capital. Cache Long/Short at 130/30 has annual management fees of approximately 0.50% plus financing costs. That’s real, but it’s recurring, not a one-time hit.