Mutual Fund Tax Clienteles
Mutual funds are pooled investment vehicles with diverse tax clienteles. Whereas many mutual funds are held primarily by taxable investors, a significant fraction of mutual fund assets are held in tax-qualified retirement accounts. Our paper investigates whether the characteristics, investment strategies, and performance of mutual funds held by diverse tax clienteles differ. Examining both mutual fund income distributions and mutual fund holdings, we find that funds held primarily by taxable investors tend to be more tax-efficient than funds held primarily in tax-deferred retirement accounts. Despite these differences, we find no evidence that any investment constraints that may arise from the funds that pursue tax efficient management strategies result in performance differences between funds held by different tax clienteles.
The authors thank Federico Belo, Li Jin, Jennifer Huang, Sheridan Titman, and seminar participants at the Australian National University, the City University of Hong Kong, the College of William and Mary, Dartmouth College, the Hong Kong University of Science and Technology, Notre Dame, Southern Methodist University, Texas A&M University, the University of Texas at Austin, the University of Toronto, and conference participants at the European Summer Symposium on Financial Markets in Gerzensee, the ISCTE Business School - Nova Annual Finance Conference on Mutual Funds and Investment Management in Lisbon, and the University of Oregon Institutional Investor Conference for helpful comments. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research.
Clemens Sialm & Laura Starks, 2012. "Mutual Fund Tax Clienteles," Journal of Finance, American Finance Association, vol. 67(4), pages 1397-1422, 08. citation courtesy of