Abstract

http://ssrn.com/abstract=2368625
 


 



Tax Efficient Asset Management: Evidence from Equity Mutual Funds


Clemens Sialm


University of Texas at Austin - McCombs School of Business; National Bureau of Economic Research (NBER)

Hanjiang Zhang


Nanyang Technological University - Nanyang Business School

December 16, 2013


Abstract:     
Investment taxes have a substantial impact on the performance of taxable mutual fund investors. Mutual funds can reduce the tax burdens of their shareholders by avoiding securities that are heavily taxed and by avoiding realizing capital gains that trigger higher tax burdens to the fund’s investors. Such tax avoidance strategies constrain the investment opportunities of the mutual funds and might reduce the before-tax performance of the funds. Our paper empirically investigates the costs and benefits of tax efficient asset management based on U.S. equity mutual funds from 1990-2012. We find that mutual funds that follow tax-efficient asset management strategies generate superior after-tax returns. Surprisingly, mutual funds that generate lower taxable distributions do not underperform other funds before taxes, indicating that the constraints imposed by tax efficient asset management do in practice not have significant performance consequences.

Number of Pages in PDF File: 52

Keywords: Dividend and Capital Gains Taxes, Mutual Fund Performance

JEL Classification: G18, G20, G23, H24

working papers series





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Date posted: December 18, 2013  

Suggested Citation

Sialm, Clemens and Zhang, Hanjiang, Tax Efficient Asset Management: Evidence from Equity Mutual Funds (December 16, 2013). Available at SSRN: http://ssrn.com/abstract=2368625 or http://dx.doi.org/10.2139/ssrn.2368625

Contact Information

Clemens Sialm (Contact Author)
University of Texas at Austin - McCombs School of Business ( email )
Austin, TX 78712
United States
HOME PAGE: http://faculty.mccombs.utexas.edu/Clemens.Sialm/
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Hanjiang Zhang
Nanyang Technological University - Nanyang Business School ( email )
S3-B1A-05 Nanyang Avenue
Singapore, 639798
Singapore
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