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Portfolio > Mutual Funds

Read Their Lips: No New Taxes

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For 2005, the iShares funds announced zero capital gains distributions on all 101 U.S. listed exchange-traded funds. It was the fourth consecutive year the company managed this impressive feat.

“Taxes can adversely impact fund performance and few fund families can offer 100 funds covering nearly every asset class along with tax efficiency due to the fund’s low portfolio turnover and unique ETF structure,” says Lee Kranefuss, CEO of BGI’s Intermediary and ETF Business.

The idea of lower tax liabilities has fueled the growing popularity of ETFs in taxable investment accounts. Compared to their larger rivals, ETFs have done a better job of managing tax consequences for investors.

In response, the mutual fund industry has stepped up its political lobbying to alter the tax treatment of annual capital gains distributions for its investors. The proposed plan would extinguish the immediate tax due on capital gains distributions, so long as the proceeds are re-invested in shares of a mutual fund.

In the fall of 2005, U.S. Senators were mulling legislation under a House bill called the Growth Act. No further progress has yet been made.


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