We believe that relative return, or the return difference between the fund and the index over a specified period, is the most suitable calculation to evaluate fund performance and attribution for passive strategies. However, investors must determine which index return is most instructive in assessing how a manager measures up to its peers and behaves in relation to its benchmark.
In this piece, we explain how net return can provide a more comprehensive view of performance for tax-sensitive investors, and we give an example of the impact of tax withholding on returns.
The views expressed in this material are the views of the Global Equity Beta Solutions group through the period ended October 31, 2022 and are subject to change based on market and other conditions. This document contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.
The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor's particular investment objectives, strategies, tax status or investment horizon. You should consult your tax and financial advisor.
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Equity securities may fluctuate in value in response to the activities of individual companies and general market and economic conditions.
The tax-equivalent yield shows what you would have to earn on an investment taxed at a 35% rate to equal the fund’s tax-free yield. The formula for tax-equivalent yield is: tax-exempt portion of yield/(1 – tax rate), plus the taxable portion of the yield, if any. A fund may invest a portion of its assets in securities that are subject to federal and/or state income taxes. When a fund invests in these securities, its tax-equivalent yield may be lower.
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All forms of investments carry risks, including the risk of losing all of the invested amount. Such activities may not be suitable for everyone. The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor's particular investment objectives, strategies, tax status or investment horizon. You should consult your tax and financial advisor. All material has been obtained from sources believed to be reliable. There is no representation or warranty as to the accuracy of the information and SSGA shall have no liability for decisions based on such information.
Any views expressed herein are those of the author(s), are based on available information, and are subject to change without notice. Individual portfolio management teams may hold different views and may make different investment decisions for different clients. There are no guarantees regarding the achievement of investment objectives, target returns, portfolio construction, allocations or measurements such as alpha, tracking error, stock weightings and other information ratios. The views and strategies described may not be suitable for all investors.
Past performance is not necessarily indicative of the future performance. Investment return and principal value will fluctuate, so you may have a gain or loss when shares are sold. Current performance may be higher or lower than that quoted.
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