can a mutual fund manager tax loss harvest?

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seugene
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can a mutual fund manager tax loss harvest?

Post by seugene » Fri Jun 08, 2018 10:00 am

Obviously, tax loss harvesting with mutual funds is available to investors in taxable accounts. Can the manager of a mutual fund tax loss harvest and thus reduce the capital gains that will be distributed the shareholders?

livesoft
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Re: can a mutual fund manager tax loss harvest?

Post by livesoft » Fri Jun 08, 2018 10:03 am

Yes..
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dm200
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Re: can a mutual fund manager tax loss harvest?

Post by dm200 » Fri Jun 08, 2018 10:07 am

seugene wrote:
Fri Jun 08, 2018 10:00 am
Obviously, tax loss harvesting with mutual funds is available to investors in taxable accounts. Can the manager of a mutual fund tax loss harvest and thus reduce the capital gains that will be distributed the shareholders?
Yes - as best I understand - this is commonly done.

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Re: can a mutual fund manager tax loss harvest?

Post by alex_686 » Fri Jun 08, 2018 10:18 am

dm200 wrote:
Fri Jun 08, 2018 10:07 am
Yes - as best I understand - this is commonly done.
Sort of. Most portfolio managers bonuses are tried to performance against a risk adjusted benchmark. They try to maximize returns for all shareholders, and many of their shareholders are in tax advantaged space so those shareholders don't care.

The accountants in operations will try to optimize and minimize the tax impact, but this is a secondary and after the fact consideration. I have worked on this side of fence. We were able to talk some portfolio managers out of some trades that were very irksome from a tax perspective, but this was the exception to the rule.

dcabler
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Re: can a mutual fund manager tax loss harvest?

Post by dcabler » Fri Jun 08, 2018 10:32 am

Yes. For example, that's what the managers of VTMSX do according to Morningstar.

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seugene
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Re: can a mutual fund manager tax loss harvest?

Post by seugene » Fri Jun 08, 2018 11:04 am

Thanks, all.

So, I guess "tax-managed" funds would do it. I wonder how common it is among funds that do not declare themselves as tax-aware.

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Toons
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Re: can a mutual fund manager tax loss harvest?

Post by Toons » Fri Jun 08, 2018 11:33 am

They do it all the time
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Re: can a mutual fund manager tax loss harvest?

Post by grabiner » Tue Jun 12, 2018 7:45 pm

seugene wrote:
Fri Jun 08, 2018 11:04 am
Thanks, all.

So, I guess "tax-managed" funds would do it. I wonder how common it is among funds that do not declare themselves as tax-aware.
If a fund isn't tax-managed, the transaction cost of tax loss harvesting hurts the reported returns, and the actual returns for fundholders who hold it in 401(k)s and IRAs. Therefore, most funds won't sell shares just to harvest losses. (They may sell shares at a loss for other reasons; a large-cap fund is likely to sell stocks which are no longer large-cap, and any capital losses realized in the process will offset gains.)
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