Triple Witching Day for Mutual Funds
October 31, 2012
Today is Halloween. And it might be called a triple witching day ... for mutual funds.
The longest weather-related U.S. trading suspension in 124 years has left money managers with one day instead of three to adjust their holdings before the fiscal year ends for more than 20 percent of them.
The closure of American exchanges during Hurricane Sandy occurred during the last week of the fiscal year for 1,521 U.S. mutual funds, according to data compiled by Morningstar Inc. With two days lost, demand from managers who want to buy and sell shares for tax and performance reasons may surge today, said Donald Selkin of New York-based National Securities Corp.
While NYSE Euronext Chief Executive Officer Duncan Niederauer says the market will be prepared should trading be lighter as customers stay home, Selkin, a 36-year veteran of Wall Street, said concentrated buying and selling by funds may have the opposite effect. Money managers have more impetus to appeal to clients after more than $440 billion was pulled from mutual funds since 2008, data compiled by Bloomberg and the Investment Company Institute show.
“You don’t know how much they’ve done already,” Selkin, the chief market strategist at National Securities, which manages about $3 billion, said in a phone interview from his home on the Upper West Side of Manhattan. “That could be the wild card -- how much they have to cram in tomorrow.”
Inside the exchange at 11 Wall Street today, traders were struggling to connect with Internet and cell phone service, according to Ben Willis, a managing director with Albert Fried & Co. NYSE Euronext said in an 8:38 a.m. advisory that the NYSE and NYSE MKT still plan to open for trading at 9:30 a.m., though customers using a floor broker “are urged to verify there is a broker present prior to routing to any orders.”
Managers use the last week of the fiscal year to lock in gains and sell falling stocks before reporting results to investors and tax authorities, Peter Sorrentino, a Cincinnati- based money manager who helps oversee $14.7 billion at Huntington Asset Advisors Inc., said in a telephone interview. The fiscal year ends today for about 21 percent of U.S. open-end mutual funds, the second-most after December when 1,567 funds report, according to Chicago-based Morningstar.