Pricing Accumulating ETFs
Posted: March 12th, 2019, 8:24 am
Hello,
I am thinking of using the iShares Core World ETF (SWDA) in a trading account to avoid income distributions. I understand that there will be Excess Reportable Income (notionally) paid 6 months after the fund's reporting year end (30 June). So I won't avoid paying income tax on the dividends; no problem with that.
However, does the market price take into account the dividends of the underlying equities during the reporting year on an ongoing basis and how does it do it?
For instance, to know the true value on a daily basis, does a market maker calculate dividends paid so far this year on the underlyings or maybe iShares publishes a daily NAV, including any cash?
Does the price become distorted around reporting year end - for instance by the market 'anticipating investors temporarily selling out of the fund to avoid being liable for income tax on the excess reportable income?
Is there any interesting or anomalous behaviour associated with accumulating ETFs?
TIA, Chloe
I am thinking of using the iShares Core World ETF (SWDA) in a trading account to avoid income distributions. I understand that there will be Excess Reportable Income (notionally) paid 6 months after the fund's reporting year end (30 June). So I won't avoid paying income tax on the dividends; no problem with that.
However, does the market price take into account the dividends of the underlying equities during the reporting year on an ongoing basis and how does it do it?
For instance, to know the true value on a daily basis, does a market maker calculate dividends paid so far this year on the underlyings or maybe iShares publishes a daily NAV, including any cash?
Does the price become distorted around reporting year end - for instance by the market 'anticipating investors temporarily selling out of the fund to avoid being liable for income tax on the excess reportable income?
Is there any interesting or anomalous behaviour associated with accumulating ETFs?
TIA, Chloe