PowerShares announced yesterday that 116 out of its 117 ETFs paid zero capital gains distributions in 2009. The only PowerShares ETF to make a capital gains distribution on the year was the NASDAQ-100 BuyWrite Portfolio (PQBW), which paid out Long-Term Capital Gains of just under 15 cents a share. PowerShares noted that the unique index methodology, which writes covered calls on the NASDAQ-100 Index, is largely the cause of the capital gains. This is the first distribution for any PowerShares equity or fixed income ETF since the firm’s inception in 2003.
This near perfect track record further demonstrates one of the main advantages of the ETF: tax efficiency. “ETFs generally allow investors greater tax planning flexibility compared to other product structures by providing control over the timing of capital gains,” said Ben Fulton, Invesco PowerShares managing director of ETFs. “Similar to shares of common stock, the shareholders of an ETF typically realize taxable consequences only when shares are sold, thereby potentially minimizing or eliminating tax liability. Additionally, the in-kind method utilized by ETF asset managers during the creation and redemption process generally allows portfolios to avoid year-end capital gain payouts.”
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Disclosure: No positions at time of writing.
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