Thanks @618. I realise for these huge funds it's probably a rounding error. But by lending out their stock (e.g. STX), which is used to drive down the price, then selling their actual holdings at artificial short-term lows when the rebalancing occurs, they are incurring avoidable losses, which will be reflected in a (slightly) reduced performance. This difference is "paid for" by those invested in these large index funds. And as they say, there is no free lunch, and the shorters aren't maintaining open short-positions months in advance out of the goodness of their hearts. I also find this fascintating because it's another example of how the rise of passive investing leads to micro-level distortions of the market. I will go back and have a look at the exact price some previous rebalancing transactions when through at.
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