Potential Capital Gains Exposure

Potential capital gains exposure is the percentage of a fund's total assets that represents the unrealized capital gains of its holdings. This is the percentage of the fund's assets that would be subject to capital gains tax if the entire fund portfolio was sold or liquidated. Realized and unrealized capital gains/losses are found in the fund's annual report.

A fund with a higher potential capital gains exposure may be more likely to realize large capital gains as a result of a manager change, strategy shift, or significant redemptions in which the manager would have to sell securities to raise cash. A high capital gains exposure often accompanies a low turnover strategy, wherein a fund holds stocks over the long term, allowing profits to accumulate. Where a negative number appears, the fund has reported losses on its books.