If they do not pay attention to distribution announcements throughout the year, many investors do not know the gains are coming until year-end, or possibly a month or two into 2001 when the 1099 actually arrives. Predicting whether your funds will realize large capital gains is an inexact science. The average frequency of trading is another indication that large capital gains may be on the horizon. If your funds recently hired a new manager or shifted strategy, they may do some shifting of assets in order to meet the new criteria. This will entail selling of currently held companies and purchasing of new companies that better fall in line with the new investment strategy.
Advisers often get their intelligence directly from the fund or fund manager.
Usually the funds are cooperative. If a big distribution is coming, the adviser may sell the fund in advance of the distribution, particularly if returns have not been profitable. Many fund families will suggest another fund in that family that is posed for better returns. An exchange from your fund to another fund in the same family will instigate a sale without causing further commission charges. Another option that advisers use is the sale of mutual funds realizing a loss to reduce the client's total gains for the year and then replacing those funds with different funds or securities in the same sector.