Further underscoring the tax efficiencies available with exchange traded funds, 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.
As is often the norm, PowerShares joins a growing list of its rivals that are reporting capital gains distributions on small percentages of their total lineups.
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%. [ETF Cap Gains Update]
“For another year, the majority of Invesco PowerShares’ product line did not have capital gains distributions,” said Dan Draper, Managing Director and Head of Invesco PowerShares, in a statement. “This underscores one of the many advantages ETFs can potentially provide shareholders seeking to maximize real returns.”
Of the nine PowerShares ETFs expected to make capital gains distributions, all but two are forecast to see those distributions come in under 1% of net asset value per share.
The Powershares S&P 500 BuyWrite Portfolio (NYSEArca: PBP) and the PowerShares KBW Bank Portfolio (NYSEArca: KBWB) are expected to only make short-term capital gains distributions, according to PowerShares.
The other seven ETFs on the list are the PowerShares KBW Capital Markets Portfolio (NYSEArca: KBWC), PowerShares NYSE Century Portfolio ETF (NYSEArca: NYCC), PowerShares KBW Property & Casualty Insurance Portfolio (NYSEArca: KBWP), PowerShares S&P 500 Downside Hedged Portfolio (NYSEArca: PHDG), PowerShares Dynamic Pharmaceuticals Portfolio (NYSEArca: PJP), PowerShares S&P SmallCap Consumer Staples Portfolio (NasdaqGS: PSCC) and the PowerShares S&P SmallCap Health Care Portfolio (NasdaqGS: PSCH).
Historically, PowerShares ETFs have not been large distributors of capital gains as “about 4.5% of our assets under management — have distributed capital gains since each fund’s respective inception. These distributions represent an average of just 0.69% of NAV,” according to a note published by the firm last month.
ETF Trends editorial team contributed to this article.