Fund tax efficiency
The property whereby transactions inside a fund create no tax event for the unitholder: tax arises when the unit is redeemed or sold, not at every trade the fund makes.
How to read the number
Hence the difference from holding a portfolio directly: coupons and dividends received by the fund raise the unit's value, and the tax on the holder is deferred until he leaves the fund.
When the metric lies
Deferred is not cancelled: on redemption the tax is taken on the whole accumulated difference at once. The conditions and reliefs are set by the tax code and change with the law, so the property has to be checked as of today rather than read from an old description.
Also known as: tax deferral inside a fund