We’ve released a few minor, but helpful changes to the Cost Analysis Report

  1. Funds’ Actual Returns for the preceding 12 months, both pre-tax and after-tax,  shown in the top table are now calculated under the assumption that all distributions are reinvested upon receipt, at the NAV of that day.  Previously, returns were calculated under the assumption that distributions were held in cash, not reinvested.  In practice, the results of the two different methods are in most cases fairly close, but the new method more closely matches how most investors hold their funds. The “Basic Fund Profile” table now shows Pre-Tax returns for both assumptions, distributions reinvested vs. not reinvested.
  2. After-tax returns are now calculated under the assumption that all capital gains distributions are long-term, as opposed to short-term. Previously, returns were calculated under the assumption that 70% of capital gains distributions were long-term and 30% short-term. While the latter assumption is based on best available information about the industry average breakdown between long and short term gains, it is not a precise match for every distribution of every fund.  In practice, the results of the two different methods are in most cases fairly close.  However, since the tax on long-term gains is lower than the tax on short-term gains, basing the after-tax calculation solely on long-term gains is a more cautious assumption. That is to say, one knows that the actual tax cost is always at least as great as what is reported, and there are no cases where we overstate the tax cost.  If and when we are able to obtain more precise data that gives the actual breakdown of a capital gains distribution into the long-term vs. short-term components, we will use that information in calculating the tax costs we report.
  3. The Total Net Assets and Growth thereof at the bottom of the “Basic Fund Profile” table are now calculated on the aggregate net assets of the fund’s entire portfolio (that is the collection of the manager’s funds of all share classes off the same underlying pool of assets), not only on the assets and growth of the share class that is queried. This gives a more meaningful representation of the size of the fund’s portfolio and whether it is growing or shrinking through inflows and redemptions more or less than the portfolio’s investment growth or decline.
  4. Some of the other rows at the bottom of the “Basic Fund Profile” table have been reordered for clarity.

The revised calculations for tax costs and after-tax returns also apply to the Fund Portfolio report.

More detail on the above topics can be found in the Glossary Page or by clicking on the labels next adjacent to each data item in the Cost Report.

We welcome any questions or comments about this update, and invite your suggestions for other enhancements to the site.