That sounds strange. Let’s say there’s a 50% stock market crash between the ETF receiving dividends and the ETF distributing them to investors. If dividends were invested, they’d be worth half. So the ETF eats these costs? Or the investors only get half the dividends? Both sound implausible.
What I could imagine is that the accumulating fund leaves received dividends as cash and only reinvests them at the same time the distributing fund would distribute them to investors. Hence emulating what an investor with a distributing fund would do when they immediately reinvest dividends.
Dunno, it’s a good question you’re posing, the flipside of which could be that reinvesting after a 50% crash would get a lot more bang for the same bucks.
I don’t know how often do most companies pay dividends, I understand it’s mostly quarterly, semi-annually and annually so the fund needs to make a sum of all received and pay it out. VWRL has a bigger payout in June (about double what’s in March, September and December) but this is because, apparently, European companies pay their dividends in May. Again, no idea of the specific.
Most ETFs pay quarterly, first month of the year being Feb or March, but think REITs pay annually and bond funds may pay monthly.
Perhaps @Dr.PI could split out this discussion to another, relevant thread?
On Finanzfluss there was once a chance to ask questions to Arne Scheehl, head of Amundi ETF solutions.
So I asked this question and the answer was what I told you. An ETF has a minimal cash position and tries to invest as much cash as possible, whether it’s an accumulating ETF or a distributing ETF.
Here is a Finanzfluss video where they talk about it (with timestamp, in German):
Since Blackrock doesn’t care, maybe those new funds would provide data? We (probably) just need a list of total per country of dividends and WHT each year. This should be useful for more than just Swiss investors. Someone wants to ask?
At a certain point (around 0.15% difference), a UCITS fund with great tracking difference offsets the lost US withholding tax compared to a US fund with a bad tracking difference.
Hence my question: is there a comparison of UCITS vs. US ETFs that combines TER, tracking difference and lost WHT?
To me it looks like ETF and index don’t have the same base line.
Plus I read that the fund lends out securities, which will be beneficial regarding the performance.
I think it is tough to calculate this because the underlying benchmark assumes different WHT then the actual WHT applied
For example assumed US WHT in benchmark is 30% but applied is 15% (treaty rate). Not sure for other countries what is the difference.
Most of the UCITS funds perform better than their benchmark because of this point. I have to say that @Dr.PI once explained this to me. It opened my eyes forever
The benchmark for US domicile funds have 0% WHT, so there it is an easier comparison.
Why should a benchmark for US and Europe differ? The FTSE All-World or the MSCI World should be the same everywhere? Or are there region-specific “Total Return” variants?
And what would be the dividend WHT rate for these indices? Always 30%?
For the ETFs which are based in US, the US companies don’t withhold taxes before paying dividend but for UCITs funds they do, so the benchmarks cannot be same.
I think there are different indexes available. Net return, Gross return, Net of tax etc.
I have a rough quantification of Irish ETFs advantage over net benchmarks: around 22 basispoints. If a UCITS fund performs better than benchmark by say 10 basis points, it’s actual costs minus lending income plus random alpha is 12 basis points.
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