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What is a Class T mutual fund?

Updated: 9/18/2023
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13y ago

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T-class funds are tax efficient versions of some of fund company's existing funds. These pay a set monthly amount based on the manager or fund company's realistic expectation of the fund's future performance. Typically, a portion of this distribution is treated as a return of capital, which is not immediately taxable.

Conversely, the return-of-capital amounts are deducted from the cost base of the fund. This will increase the capital gain when the fund is eventually sold. The other negative is that in periods of poor performance, the fund value may not grow enough to offset the amounts distributed. This would result either in a drop in the fund's net asset value per share or a distribution cut.

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