ProShares, the largest issuer of inverse and leveraged exchange traded funds, said this week that it expects none of its nearly 130 equity and fixed income ETFs will distribute capital gains this year.
“Tax efficiency is important to ETF shareholders,” said Michael L. Sapir, Co-Founder and CEO of ProShare Advisors LLC, in a statement. “We are pleased that our management of ProShares ETFs contributed to no capital gains being distributed to our shareholders.”
For the most part, ETFs that issue capital gains distributions typically experience greater trading activity, use futures contracts, see a significant change up in its underlying index or track fixed-income securities.
Specifically, leveraged and inverse ETFs that use futures contracts can incur capital gains distributions. Moreover, currency-hedged equity ETFs may see capital gains distributions, with managers triggering gains by rolling currency futures and forward contracts hedges as the U.S. dollar strengthened this year. [Why Some ETFs Have Cap Gains]
The no capital gains announcement from Maryland-based ProShares came just days after Invesco’s (NYSE: IVZ) PowerShares unit, the fourth-largest U.S. ETF issuer, said it expects just nine of its 116 ETFs to distribute capital gains this year.
Prior to the PowerShares announcement, of the seven large ETF providers that have published capital gains distribution estimates, including iShares, Vanguard, State Street Global Advisors, Charles Schwab, PIMCO, Guggenheim Investments and First Trust, only 74 of 712 funds will issue capital gains distributions, with many less than 1% of the ETFs’ net asset value. In contrast, some equity mutual funds have announced capital gains distributions of 5% to 10%. [Small Amount of PowerShares ETFs to Have Cap Gains]
In 2014, ProShares continued expanding its lineup of traditional long ETFs with the introduction of new funds, including the ProShares MSCI EAFE Dividend Growers ETF (NYSEArca: EFAD), ProShares Morningstar Alternatives Solution ETF (NYSEArca: ALTS) and the ProShares Managed Futures Strategy (NYSEArca: FUTS).
ProShares MSCI EAFE Dividend Growers ETF
ETF Trends editorial team contributed to this post.