Section III.C. Investment Philosophies and Styles

Question 1

Capital Gains Realization Rate

Answer 1

a tax-efficiency ratio

the percentage of the fund’s net unrealized capital gains
that the manager chose to realize

CGRR = CGDIST/GAINSTOCK

Question 2

Portfolio Turnover Rate

Answer 2

a simple measure of potential taxation, but not usually the
best measure of tax-efficiency
measures how often assets or investments in a fund or
portfolio are bought and/or sold within a specific time
period (usually measured annually)
calculated by dividing the net assets or investments bought
and sold by the portfolio value (e.g., NAV)

Question 3

Relative Wealth Measure

Answer 3

the higher the better; zero indicates little tax impact
RWM = [(Rat – Rbt) / (1 + Rbt)] x 1,000
RWM works in all kinds of markets
RWM is particularly helpful when analyzing separately
managed accounts

Question 4

Consultant Capture Ratio

Answer 4

captures the percentage of return that taxable investors
retain
CCR = after-tax return divided by before-tax return
works well in smooth, upward-trending markets

Question 5

Accountant’s Ratio

Answer 5

equals the ratio of short-term capital gains realized to total
capital gains realized