Tax-management: Our Approach

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Time-tested tax management

35+ years with an after-tax mindset

Our active tax-managed advantage

Four key considerations for tax planning

Beyond tax-loss harvesting

The active tax-management approach

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The value of tax drag vigilance

Longer-term. Larger results.

According to Morningstar, U.S. equity funds (active, passive, ETFs) gave up 2% of returns the past five years (ending 09/2025), making 10% annualized returns more like 8%. This loss of return ("tax drag"1) is a hidden, yet avoidable fee that many investors fail to consider. The good news is that our active tax-managed solutions have been proven to help.

See how our tax-managed equity funds stack up against our peer group:

Average annual tax drag for 5 years ending September 30, 20252

The following Russell Investment Company Funds (Class S) were evaluated relative to the following peer groups: Tax-Managed U.S. Large Cap Fund to U.S. Equity Large Cap peer group, Tax-Managed U.S. Mid & Small Fund to U.S. Equity Small Cap peer group, Tax-Managed International Equity Fund to International Equity peer group, Tax-Managed Real Assets Fund to Real Assets peer group, Tax-Exempt Bond Fund to Municipal Bond peer group, and Tax-Exempt High Yield Bond Fund to High Yield Municipal Bond peer group. Current to the most recent month-end performance for Russell Investment Company mutual funds is available by visiting: https://russellinvestments.com/us/fund-center/performance-pricing.

 
 
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Value of Tax Management

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IMPORTANT RISK DISCLOSURES

Mutual fund investing involves risk, principal loss is possible.

Please remember that all investments carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns.

Model strategies represent target allocations of Russell Investment Company funds; these models are not managed and cannot be invested in directly. You and your financial advisor may work to combine selected funds that differ from the illustrated combinations depending upon individual investment objectives. Model strategies are exposed to the specific risks of the funds directly proportionate to their fund allocation. The funds comprising the strategies and the allocations to those funds have changed over time and may change in the future.

1Tax Drag reflects the arithmetic average of Morningstar Tax Cost Ratio. Data includes all share classes and reflects Morningstar category of US Equity and Taxable Bond for equities and fixed income respectively. The Morningstar Tax Cost Ratio measures how much a fund's annualized return is reduced by the taxes investors pay on distributions.

Methodology for Tax Drag: Includes all open-ended investment products – mutual funds/ETFs that are both active and passive. Tax Drag reflects the arithmetic average of Morningstar Tax Cost Ratio. Data includes all share classes and reflects Morningstar category of US Equity and Taxable Bond for equities and fixed income respectively.

Morningstar’s tax cost ratio assumes the highest possible applicable tax rates, including the 3.8% net investment income tax. Many investors are not subject to the highest rates. Note that tax drag calculations only apply to taxable accounts.

U.S. equity funds: Morningstar broad category ‘US Equity’ (large/mid/small V/B/G) which includes mutual funds and ETFs (and multiple share classes).

Average U.S. equity fund Distribution: Capital Gains/Share (% of NAV) based on Morningstar U.S. OE Mutual Funds and ETFs. % = Calendar Year Cap Gain Distributions / Year-End NAV. Distribution is assumed to be made at last day of year and reinvested. Tax rate is 23.8% (Max LT Cap Gain 20% + Net Investment Income 3.8%).

The average capital gain distribution for the Morningstar U.S. OE Mutual Funds and ETFs that had a distribution for 2018, was 11% of the fund’s Net Asset Value. % = Calendar Year Cap Gain Distributions / Year-End NAV. Distribution is assumed to be made at last day of year and reinvested.

2U.S. Equity: Morningstar U.S. Equity Universes average. For International Equity: 75% U.S. Fund Foreign Large Blend and 25% U.S. Fund Diversified Emerging Markets. For Real Assets: 40% U.S. Fund Real Estate, 30% U.S. Fund Natural Resources, and 30% U.S. Fund Infrastructure. For Fixed Income, Taxable Bond Category Group.

Morningstar Categories included: US Large Blend, US Small Blend, Non-U.S. Equity = 25% Diversified Emerging Markets / 75% Foreign Large Blend. Average of Morningstar’s Tax Cost Ratio for universes as defined. Passive is defined as being an index fund as reported by Morningstar or part of an ETF Category.

Securities products and services offered through Russell Investments Financial Services, LLC, member FINRA, part of Russell Investments. For information on the Financial Industry Regulatory Authority (FINRA), go to www.finra.org.

The information, analyses and opinions set forth herein are intended to serve as general information only and should not be relied upon by any individual or entity as advice or recommendations specific to that individual entity. Anyone using this material should consult with their own attorney, accountant, financial or tax adviser or consultants on whom they rely for investment advice specific to their own circumstances.

Products and services described on this website are intended for United States residents only. Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained on this website should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional. Persons outside the United States may find more information about products and services available within their jurisdictions by going to Russell Investments' Worldwide site.

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Russell Investments' ownership is composed of a majority stake held by funds managed by TA Associates Management, L.P., with a significant minority stake held by funds managed by Reverence Capital Partners, L.P. Certain of Russell Investments' employees and Hamilton Lane Advisors, LLC also hold minority, non-controlling, ownership stakes.

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First used: July 2021. Updated April 2025. RIFIS-24112