Stephen Hamilton Comments on Tax Impact of Asset Managers Rebalancing Portfolios With Financial Times

Tax partner Stephen Hamilton discussed how many large investment funds are working to offload shares to avoid Internal Revenue Service (IRS) scrutiny in the Financial Times article “Tech Boom Forces US Funds to Dump Shares to Avoid Breach of Tax Rules.”

The publication noted that the IRS requires that any “regulated investment company” – which includes the majority of mutual funds and exchange traded funds – keep the weight of large holdings to less than half of their overall portfolio.

Hamilton noted that the need to reshuffle holdings could hinder fund performance and trigger some capital gains taxes.

“If you were dealing with highly concentrated positions, the cure might involve selling a lot of shares. It’s not ideal obviously,” Hamilton said.