Only 84 of the 1,370 ETFs trading in the United States are paying capital gains distributions for 2011, according to a comprehensive survey of ETF providers conducted by IndexUniverse. The numbers include 202 exchange-traded notes, which are included within the broader ETF universe under the IndexUniverse ETF Classification System.
According to IndexUniverse, the low payout ratio, which equates to just 6 per cent of the broader universe – demonstrates the tax efficiency of ETFs.
The most impressive performance came in traditional equity ETFs, where just 19 of 756 ETFs paid distributions. These payouts, however, included the fund with the largest single distribution by any ETF in 2011 – the 15.62 per cent payout by the Market Vectors − Brazil Small Cap ETF (NYSEArca: BRF).
Fixed income, however, fared far worse. Thirty-seven of 156 fixed-income ETFs paid out distributions, or nearly 24 per cent of all non-leveraged ETFs. The payouts were small—31 of 37 funds paid out gains totalling less than 1 per cent of each of the fund’s net asset value. Nonetheless, the number of payouts was high.
Leveraged and inverse ETFs also saw significant distributions, with 25 of 259 geared ETFs on the market paying out distributions, or 10 per cent of all products.
Alternative ETFs – an asset category that includes hedge fund replication, long/short ETFs and similar strategies – had 9 of 49 ETFs paying distributions, or 18 per cent of those funds.
Currency ETFs and Asset Allocation ETFs, however, were perfect, with zero payouts among a combined 51 funds.
