The year-end periods provides the ETF industry with a couple of opportunities to flex its collective muscle; performance comparisons generally tend to favor those products with lower expense ratios–a defining feature of exchange-traded funds. But early January also puts another benefit of exchange-traded products into focus: enhanced tax efficiency relative to traditional mutual funds. The nuances of the exchange-traded structure have the potential to bring additional tax efficiencies to investors thanks to the availability of an “in kind redemption” that ultimately gives investors more control over the timing of tax obligations. Mutual funds, on the other hand, have a nasty tendency to stick remaining shareholders with tax liabilities incurred as a result of redemptions by others–a development that can obviously be undesirable [see Tax Loss Harvesting With ETFs: 6 Ideas To Lower Client Liabilities].
ETFs won’t allow investors to skip out on their taxes, but this product structure can deliver more control and greater efficiency in this regard. It is important to note, however, that not all ETFs are created equal when it comes to tax efficiency. Certain asset classes are less efficient than others; bond ETFs, for example, should be expected to incur capital gains taxes with some regularity.
Below, we run through the capital gains results for several of the largest ETF issuers, beginning with the market leader: [click to continue…]
The latest addition to PowerShares’ ETF lineup is a fund focusing on convertible bonds, a unique asset class that maintains characteristics of both fixed income and equity securities. The new PowerShares Convertible Securities Portfolio (CVRT) will seek to replicate the performance of the BofA Merrill Lynch All U.S. Convertibles Index, which serves as the benchmark [...]
As investors have become more comfortable with the marriage of fixed income exposure and the ETF wrapper, billions of dollars have flowed into bond ETFs in recent years. Impressive innovation in the space has provided investors with more options than ever before, including enhanced granularity in virtually every corner of the fixed income market. Still, [...]
Fixed income ETFs have been one of the hottest growth areas in a rapidly-expanding industry. According to the ETF screener, there are now more than 100 bond ETFs available to U.S. investors, a significant increase from just one year ago. At the end of February, bond ETF assets totaled about $107 billion, an increase of [...]
Fixed income investments are a crucial component of any well diversified portfolio. Depending on investor age and time until retirement, most financial professionals recommend that at least half of your portfolio to be in fixed income securities, mostly low risk government bonds and high quality corporate securities. Yet, with yields hovering around zero and choppy [...]
Following a tremendously successful 2009 that saw more than $40 billion flow into fixed income ETFs, the number of bond ETFs is expected to increase significantly in 2010. In what could be the first of many new product launches, iShares introduced a line of new municipal bond, or “muni,” ETFs on Friday. Unlike existing muni [...]
As the ETF industry has continued its rapid expansion, there has been much debate surrounding the sustainability of the current growth and the potential saturation of the market. The first ETFs were relatively simple products, offering exposure to the world’s most widely-followed equity benchmarks. But the last ten years have seen hundreds of new ETFs [...]
In the business of asset management, bond investing may not get much love, but it can be as vital a component of an investor’s portfolio as equities. Fixed income investing isn’t nearly as sexy as stock picking, but as many investors have learned in recent years, a well-rounded bond allocation can significantly reduce the overall [...]
The reasons for the rise of the ETF industry are numerous: intraday liquidity, (potentially) superior tax efficiency, and enhanced transparency relative to traditional actively-managed mutual funds have all contributed to the billions of dollars of inflows that these funds have seen in recent years. But the real attraction for most ETF investors is the reduced [...]
Most ETFs available to investors today fit neatly into one of several primary asset class categories: equity ETFs, bond ETFs, commodity ETFs, etc. But as the ETF industry continues to rapidly expand, sponsors have introduced increasingly complex funds that track unconventional benchmarks and defy a quick categorization. SPDR Barclays Capital Convertible Bond ETF (CWB) is one [...]
