Do Active ETFs Delivery on Tax Efficiency?
Active ETFs can offer significant tax reductions, on average, versus active mutual funds in three of the four categories we examine. Active ETFs may provide direct cost savings, too.
In the previous article of this series, we introduced you to the world of active ETFs and the features of these funds. Although we referenced the potential tax benefits of using active ETFs instead of traditional mutual funds in our earlier post, this aspect of active ETFs deserves greater attention. (One reader even wrote to request more research on the topic!) While the tax efficiency of passive ETFs has been addressed in multiple industry reports and academic papers, there’s a dearth of information on active ETF taxation. We’re here to fill this gap in the tax data while also quantifying the differences in active ETF and mutual fund expense ratios across four key asset classes. Let’s explore our findings!