WisdomTree announced that it has delivered zero long or short-term capital gains distributions across all of its 41 equity ETFs for 2008.
The announcement is especially relevant to mutual fund investors who are seeking to harvest tax-losses while avoiding year-end capital gains distributions.
The fact that WisdomTree was able to avoid capital gains distrubutions reinforces the claim that ETFs are a more tax-efficient investment vehicle than mutual funds.
The reason that many mutual fund investors will receive a year-end tax hit is because actively managed mutual funds sell securities in order to meet redemption requests, potentially triggering capital gains for all remaining shareholders.
ETF investors can buy and sell shares on an exchange similar to common stock, the sale of an ETF would typically only have a taxable consequence for the selling investor and not the other shareholders.
Additionally, ETF managers typically use the “in kind” redemption process which generally allows portfolios to avoid year-end capital gain distributions.
For a complete listing, see the WisdomTree ETF Directory.