Tax efficiency is important for personal or after-tax portfolios. Here, the manager of a portfolio of individual stocks and bonds can determine if, when, and how, he takes profits and losses in the portfolio, which in turn determines the capital gains taxes paid in a given year. The result of tax efficiency is, over time, less taxes paid. O’Brien Greene customizes the tax efficiency of each portfolio because each portfolio has only one owner, and we know the owner’s tax situation. Such customized tax efficiency is not possible at a mutual fund with hundreds of thousands of investors. indeed, mutual funds suffer from structural tax inefficiency Many fund owners experienced this in recent years, as they received capital gains tax bills even as the fund share price fell below their cost, Yes, if the fund management sells shares to pay for redemptions, everyone gets the realized gains, regardless of whether he owns the fund at a loss or a gain.