A friend asks you to help her decide between two actively managed funds (F and V). Your friend is convinced that both managers have superior stock picking ability and prefers to rank funds based on their tax efficiency. Fund F has $289 million of assets under management and Fund V has $653 million under management. Furthermore, Fund F had security sales of $37 million over the past 12 months and Fund V had sales of $569 million. Which fund is more tax efficient? Why is tax efficiency an important factor to consider for an investor in active portfolios?

Answer rating: 100% (QA)

To determine which fund is more tax efficient we need to compare their turnover ratios which measure ... View the full answer