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The Mawer tax effective strategy

December 6, 2017

A tax-effective approach to investing makes sense because it can minimize taxes and provide investors with the ability to compound those savings in future years. At Mawer we use multiple strategies to manage taxable mandates in order to maximize after-tax returns.

Here’s what we do and how we do it:

1. Aim for low turnover

Our investment philosophy often leads to lower turnover among our investments. We look for companies that we would be comfortable holding through a full economic cycle or longer, making the average holding period for our securities between five to ten years. This low turnover limits the amount of realized capital gains distributed to investors over time which can translate into investors paying less tax.

2. Offset capital gains wherever possible

One strategy we use to offset capital gains is to deliberately trigger capital losses in certain securities, provided that we can invest in a highly correlated substitute. This minimizes the risk that we miss any upside in the security we sold for the 30 day period we need to be out of in order to use the loss. These losses can help offset capital gains realized in other securities.

3. Rebalancing considerations

Rebalancing involves periodically buying or selling assets in your portfolio to maintain your original desired level of asset allocation. For most of our clients, our asset mix strategy is designed to be long-term, and any changes tend to be incremental and infrequent. We believe that constantly adjusting our asset mix and rebalancing portfolios can create unnecessary transaction costs and adverse tax consequences for our clients. For discretionary managed portfolios, our Investment Counsellors consider the tax implications of rebalancing trades in our clients’ accounts and, if necessary, look for opportunities to use client cash flows instead of selling certain securities which could trigger capital gains.

4. Location matters

Our Investment Counsellors also advise the most tax efficient location to hold certain asset classes in order to minimize tax liabilities. For example, securities that generate interest income or foreign dividends may be housed in tax-deferred accounts, whereas investments that generate more tax-friendly income, such as Canadian dividends, may be housed within a taxable account.

5. A tax credit for minimizing distributions

We are also able to take advantage of the Capital Gains Refund Mechanism within each Mawer Mutual Fund, where possible. The Capital Gains Refund Mechanism is a complex set of tax law provisions designed to prevent taxing the same capital gain twice—when the taxable investor sells units for a gain and when the fund in question distributes capital gains to unitholders. We apply this special formula to determine the amount our mutual fund’s capital gains realized in a year can be kept within the fund without attracting tax. This process can help soften our clients’ tax burden.


This communication is an overview only and it does not constitute financial, business, legal, tax, investment, or other professional advice or services. It is not intended to be a complete statement of the law or an opinion on any matter. If you (or any of your family members) are a U.S. citizen, hold a U.S. green card, or are otherwise considered a U.S. resident for U.S income/estate tax purposes, the Canadian and/or U.S. tax implications could be substantially different from those outlined herein. No one should act upon the information in this communication as an alternative to legal, financial or tax advice from a qualified professional. No member of Mawer Investment Management Ltd. is liable for any errors or omissions in the content or transmission of this email or accepts any responsibility or liability for loss or damage arising from the receipt or use of this information.

While we endeavour to ensure that the information in this communication is correct, we do not warrant or represent its completeness or accuracy. This communication is not updated, and it may no longer be current. To the maximum extent permitted by applicable law, we exclude all representations, warranties and conditions relating to this communication.


Mawer Investment Management Ltd. provides this publication for informational purposes only and it is not and should not be construed as professional advice. The information contained in this publication is based on material believed to be reliable at the time of publication and Mawer Investment Management Ltd. cannot guarantee that the information is accurate or complete. Individuals should contact their account representative for professional advice regarding their personal circumstances and/or financial position. This publication does not address tax or trust and estate considerations that may be applicable to an individual’s particular situation. The comments are general in nature and professional advice regarding an individual’s particular tax position should be obtained in respect of any person’s specific circumstances.