4 Funds About to Break Capital Gainless Streaks
These funds hadn't paid out a capital gain to investors in at least 10 years but expect to this year.
Fund companies have started to tell investors what kind of income and capital gains distributions they can expect in December. Fidelity, American Funds, T. Rowe Price, Franklin Templeton, BlackRock, and many others have posted preliminary estimates of their funds' year-end payouts on their websites. Vanguard will disclose its educated guesses on Nov. 11. As usual, there are some whoppers out there. BlackRock Small Cap Growth Equity (CSGEX), for example, could distribute gains of between 25% and 27% of the fund's Oct. 10, 2014, net asset value, according to BlackRock. That comes a year after the fund paid out a gain that was about 50% of the fund's 2013 year-end NAV.
After more than five years of generally rising markets, many actively managed stock funds have exhausted pent-up losses that they usually use to offset realized gains. That, plus the usual store of manager switches, outflows, and profit-taking, has made it difficult for managers to avoid making distributions. Still, it was surprising to see a few funds that have gone years without paying out capital gains included in the estimates. A handful of funds with Morningstar Analyst Ratings probably will break streaks of 10 or more years without issuing taxable capital gains in 2014. It just goes to show that, just as with performance, past is not necessarily prologue when it comes to shopping for tax-efficient funds.
Dan Culloton does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.