Dividends and realization of capital gains are carefully managed to help achieve the Cache Exchange Fund’s goal of providing tax-deferred diversification:
Dividends and Investment Income:
When dividends are received from the stocks within the exchange fund – or when investment income is received from its real estate investments – they are treated as income for the fund. This income can be used in various ways depending on the fund's needs and investment strategy. Typically, dividend or other income will be reinvested into the fund to further diversify the portfolio or held as cash to manage the fund's liquidity needs. As cash accumulates in the portfolio, the fund managers may distribute cash to the investors.
Capital Gains:
Exchange funds are structured to minimize the occurrence of taxable capital gains. By design, these funds avoid frequent buying and selling of assets, which helps in reducing taxable distributions. Cache generally aims to maintain the original assets contributed by investors, only reallocating if absolutely necessary due to major corporate actions or significant strategic shifts in the fund’s objectives.
Together, these approaches are designed to reduce tax drag while maintaining a diversified portfolio.
Tax Reporting:
Investors in our funds receive annual tax documents via the Schedule K-1 form, which reports relevant details for tax filing.