Thoughts on ishares's new I500 ETF?

[alijha]

I recently came across this new ishare’s ETF (I500 / IE00BMTX1Y45 / iShares S&P 500 Swap UCITS ETF) and got intrigued.

It’s synthetic ETF (and apparently the first such one for ishares) with fairly low TER (0.07%), negative tracking error (vs. net index, as is typical for synthetics using swaps to avoid dividend taxes), and among key selling points some publications note that it will hold a “substitute basket restricted to non-dividend paying stocks” thus avoiding associated taxes.

Most synthetic ETFs in CH are penalized with fictional income taxes - I presume due to such swap basket typically containing divs or something, these taxes make them comparable to conventional wisdom approach of going with US-domiciled physical ETFs, but with extra risks of synthetic constructions. And so if this new ETF promises tax-free divs, is this the holy grail of tax-efficient investing into US market or what? Am I missing anything? In ICTAX for last year it’s already listed with the income of $0 FWIW.

Anyone ventured into the area of synthetic etfs and has any insights about it?

[San_Francisco]

S&P500 as underlying index.
Is going to be taxed as income - just as any other Swapper.

@alijha

among key selling points some publications note that it will hold a “substitute basket restricted to non-dividend paying stocks”

I don’t know which if any third-party publications make this claim. Going straight to the horse’s mouth though, iShares themselves lists a ton of dividend payers among their physical holdings.

[alijha]

@San_Francisco

S&P500 as underlying index.
Is going to be taxed as income - just as any other Swapper.

Why?

@San_Francisco

I don’t know which if any third-party publications make this claim.

For example

BlackRock launches synthetic S&P 500 ETF

Going straight to the horse’s mouth though, iShares themselves lists a ton of dividend payers among their physical holdings.

Yes, but they change often enough if you check holdings as of a few different dates. A few names are dividend paying, yes, e.g. PEP in current top 10 - but they didn’t hold at its previous ex dividend date, Dec 3, and I suppose they’ll get rid of it before next ex/d/d

[REandSTOCK]

It has no taxable income in ICTax because the fund was launched on the 24th september 2020. There WILL be a taxable income in 2021.

[wapiti]

Have a look at this post regarding taxation of swap etfs

Tax optimisation for ETF investing

@Bojack MSCI and VWRL don’t follow the same indexes. To make a good comparison, you should take MSCI World ETFs . Anyway, the differences dividend differences are too high in your table. I have tried to compare multiple ETFs with the ICTAX data (all currency is CHF). There are no major trends and now I have even more questions . Few observations: IE00BK1PV551 distributes only once a year. This would potentially have an impact on the ratio I have some doubt about the return data fr…

[San_Francisco]

@alijha

Why?

I think there used to be times when this was possible: Receiving no actual dividends but tracking an index synthetically. But tax authorities in many countries caught up to this (also swap income could potentially be taxed).

[alijha]

@wapiti

Have a look at this post regarding taxation of swap etfs

What about that post? Nothing relevant to me as far as i can see

@REandSTOCK

It has no taxable income in ICTax because the fund was launched on the 24th september 2020. There WILL be a taxable income in 2021.

It has existed for more than a whole quarter in 2020, accumulating some of the dividends from that quarter

[nabalzbhf]

Yes but those tend to have only a single date in ictax. Also sometimes it takes time for them to compute it, so would appear later.

[San_Francisco]

„Bei kollektiven Kapitalanlagen, welche ihr Exposure synthetisch replizieren, ist zwingend ein gesondertes Steuerreporting für Schweizer Einkommenssteuerzwecke zu erstellen, aus welchem die Rendite des® Basiswerte(s) hervorgeht. Massgebend für die Ermittlung des steuerbaren Ertrages von Swap-based ETFs, welchen Aktienindizes zugrunde liegen, ist die Nettodividenden-Rendite (net dividend yield). Darunter ist die Bruttodividenden-Rendite der entsprechenden Indizes, abzüglich der anwendbaren Quellensteuern zu verstehen. Die Nettodividenden-Rendite für alle wichtigen Aktienindizes wird von den anerkannten Providern publiziert und kann für das Steuerreporting verwendet werden.“

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