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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.
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.
They do it all the time
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee
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.)