The effect of tax clientele for fund investment on fund manager’s behavior in fund market: The case of Korea

This study investigates whether any difference can be found in fund management style, depending on the type of fund being managed for tax purposes and even if the fund invests in the same underlying assets. To do so, this study reviews the ratios of increases in the tax basis to increases in the basis (the tax basis ratio) in a quarter. This study also reviews the ratio of equity value to the NAV of a fund for research purposes. The tax basis ratio of a pension fund is higher than that of a general fund. A pension fund manager tends to employ a fund management strategy that does not focus on the reduction of tax burdens on fund investors compared with a general fund manager. This phenomenon may be attributed to the fact that a pension fund manager is less sensitive to the increased tax burden on a fund investor, because pension income is taxed at a lower rate than dividend. Moreover, this finding is due to the fact that pension fund investors already enjoy multiple tax benefits, such as tax credit during contribution.