With exchange-traded funds rapidly becoming more mainstream investment vehicles, a debate has emerged over how to maximize their tax-efficiency capabilities.

Fund investors looking for a low-cost, tax-efficient alternative to mutual funds have two different ETF models available to them. Vanguard Index Participations Equity Receipts, or VIPERs, are an ETF class of some of the fund giant's existing conventional mutual funds. The Valley Forge, Pa.-based fund manager launched 14 VIPERs last year to leverage its brand in the burgeoning ETF market.

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