It’s that time of the year again: capital gains distribution season. Fund companies are required to give investors an idea of what their 2025 tax bills might look like by estimating how much their funds will distribute in income and capital gains later this year.
Calendar-year 2025 was another strong year for many asset classes. In equities, emerging-market funds posted large gains as countries such as South Korea, Mexico, Brazil, and China all gained more than 30% through late October. Many international indexes have also outpaced their US peers.
In the US, large-cap growth funds again did well as companies continued to benefit from artificial intelligence enthusiasm. Still, most US indexes have gained at least 10% this year, including high-risk micro-caps, which have gained roughly 20%.
As investors continue swapping actively managed stock funds for passive exchange-traded offerings, many managers have had to realize gains to meet redemptions. Funds must pass those long- and short-term proceeds to shareholders who, if they own their funds in taxable accounts, must pay taxes.
Fund families are still releasing their estimates, which they can still revise, but a preliminary look shows many strategies will make sizable distributions. Most will pay out their realized gains between late November and the end of the year.
This year, we highlight the 50 highest capital gains distribution estimates (as a percentage of each fund’s net asset value), followed by a sampling of many larger fund families’ distribution estimates (with links to entire fund family lists if searching for a particular fund).
A common theme among most of the top 50 funds is outflows. More than 35 funds had outflows greater than 10% of assets so far in 2025 (based on total assets under management at the start of the year). All of the top 10 had outflows of at least 30%. We typically used the oldest share class, but it is important to pay attention to which share class you own. Some fund share classes have vastly different NAVs, mostly on account of different initiation dates, leading to large discrepancies in payout percentages.
Another common theme among the top 50 is poor performance. More than 30 of the 50 funds have finished in the bottom half of their respective categories over the trailing one-year period through September. More than 35 landed in the bottom half over the trailing three-year period as well, so they have been consistently poor.
Topping the list is Royce Smid-Cap Total Return RDVIX, which is slated to distribute more than 75% in capital gains. Its outflows topped 40% this year. Five other strategies are distributing more than 40% of NAV. Four of those strategies had more than 50% of assets in outflows this year.
Other funds have gone through personnel or process changes, which might have triggered capital gains. For example, several Invesco international strategies made the list as the firm made a raft of changes to its international fund lineup, including management and mandate changes this year.
Why You Should Pay Attention to Capital Gains Distribution Estimates
If you invest in a tax-sheltered account, such as a 401(k) or an IRA, and you’re reinvesting your distributions, distribution previews seem like a non-event because you won’t owe taxes until you sell your holdings in retirement, and maybe not at all if you invest in a Roth IRA.
There are good reasons for others to pay attention to them, though. Investors with taxable accounts owe taxes on distributed gains, even if they reinvested them, unless they’ve sold losing positions to offset the gains.
Reinvested capital gains help increase your cost basis, which could reduce the capital gains taxes you owe when you eventually sell the fund. So, if you hold a serial capital gains-distributing fund, selling it in the future might cost less than you anticipated, owing to all the cost-basis step-ups that the regular distributions triggered.
Taxable investors considering buying a fund that has predicted it will make a distribution should consider delaying the purchase until after the payout to avoid getting distributions without the benefit of any of the gains.
Tax considerations, of course, are just one of the many factors in an investment decision. Check with a tax advisor before trading to avoid or capture a distribution.
Select Fund Company Distribution Projections
We will update this section with fund company estimates as they become available.