Just like individuals, mutual funds can do tax-loss harvesting, so they can do losses to offset the gains. A tax-managed fund will be more likely to do something like that. And also if the fund involves investments in any kinds of bonds, it might choose bonds that have tax breaks like municipals, Treasuries,... Managed funds also make it easier to manage risk by spreading our investments across a range of assets and products. KiwiSaver is a good example. With a managed fund our money is spread across more investments than it would be if we bought an investment such as a share or property directly.

While a tax-managed balanced fund is likely to be more tax-efficient than a normal all-in-one fund, it is still going to be less tax-efficient than a DIY allocation, for two reasons. First, it allows for fewer opportunities for tax-loss harvesting. With an all-in-one fund, you can only tax-loss harvest if the whole fund goes down.