Equalisation for funds generating interest?

aroominyork

I'm only using the MM fund for PSA purposes so long as the net return out-yields a low coupon gilt. Bear in mind that expected base rate reductions are priced into gilt yields but only slightly into MM yields, so it's a case of make hay while the MM sun shines. RL's MM is currently yielding c.5.4% which is pretty darn good for an instant access (T+afewdays) account.

itwasntme001

Hijacking this thread for my question as it is very much related.

I have bought/sold some iShares bond ETFs (ERND, SDIG, etc.) and wondering is equalisation applies for these?  I can't see anywhere on the iShares site about this and the CTC I received from my platform does not show any equalisaiton amounts for these funds.

Quesiton is is there equalisation payments for these funds?  If not, why is it treated differently to the money market funds?

masonic

itwasntme001 said:

Hijacking this thread for my question as it is very much related.

I have bought/sold some iShares bond ETFs (ERND, SDIG, etc.) and wondering is equalisation applies for these?  I can't see anywhere on the iShares site about this and the CTC I received from my platform does not show any equalisaiton amounts for these funds.

Quesiton is is there equalisation payments for these funds?  If not, why is it treated differently to the money market funds?

You are referring to ETFs, so no. The holder on the ex-dividend date is entitled to the whole dividend, just like any other share. You do not have to hold a share for the entire distribution period to get the dividend. Equalisation applies to open-ended funds, not exchange traded instruments.

itwasntme001

masonic said:

itwasntme001 said:

Hijacking this thread for my question as it is very much related.

I have bought/sold some iShares bond ETFs (ERND, SDIG, etc.) and wondering is equalisation applies for these?  I can't see anywhere on the iShares site about this and the CTC I received from my platform does not show any equalisaiton amounts for these funds.

Quesiton is is there equalisation payments for these funds?  If not, why is it treated differently to the money market funds?

You are referring to ETFs, so no. The holder on the ex-dividend date is entitled to the whole dividend, just like any other share. You do not have to hold a share for the entire distribution period to get the dividend. Equalisation applies to open-ended funds, not exchange traded instruments.

This link seems to suggest that there are equalisation payments for ETFs:

https://www.sygnia.co.za/press/exchange-traded-funds-and-equalisation-explained

Although I think it depends whether ETFs are closed-ended or open-ended?  So yes to the latter but no to former?  Or are all ETFs open-ended?

Confusing!!

Hoenir

itwasntme001 said:

Or are all ETFs open-ended?

Shares (in an ETF) can be created or cancelled at will. 

masonic

itwasntme001 said:

masonic said:

itwasntme001 said:

Hijacking this thread for my question as it is very much related.

I have bought/sold some iShares bond ETFs (ERND, SDIG, etc.) and wondering is equalisation applies for these?  I can't see anywhere on the iShares site about this and the CTC I received from my platform does not show any equalisaiton amounts for these funds.

Quesiton is is there equalisation payments for these funds?  If not, why is it treated differently to the money market funds?

You are referring to ETFs, so no. The holder on the ex-dividend date is entitled to the whole dividend, just like any other share. You do not have to hold a share for the entire distribution period to get the dividend. Equalisation applies to open-ended funds, not exchange traded instruments.

This link seems to suggest that there are equalisation payments for ETFs:

https://www.sygnia.co.za/press/exchange-traded-funds-and-equalisation-explained

Although I think it depends whether ETFs are closed-ended or open-ended?  So yes to the latter but no to former?  Or are all ETFs open-ended?

Confusing!!

That might be true in South Africa, where that webpage is from.

itwasntme001

masonic said:

itwasntme001 said:

masonic said:

itwasntme001 said:

Hijacking this thread for my question as it is very much related.

I have bought/sold some iShares bond ETFs (ERND, SDIG, etc.) and wondering is equalisation applies for these?  I can't see anywhere on the iShares site about this and the CTC I received from my platform does not show any equalisaiton amounts for these funds.

Quesiton is is there equalisation payments for these funds?  If not, why is it treated differently to the money market funds?

You are referring to ETFs, so no. The holder on the ex-dividend date is entitled to the whole dividend, just like any other share. You do not have to hold a share for the entire distribution period to get the dividend. Equalisation applies to open-ended funds, not exchange traded instruments.

This link seems to suggest that there are equalisation payments for ETFs:

https://www.sygnia.co.za/press/exchange-traded-funds-and-equalisation-explained

Although I think it depends whether ETFs are closed-ended or open-ended?  So yes to the latter but no to former?  Or are all ETFs open-ended?

Confusing!!

That might be true in South Africa, where that webpage is from.

From what I read ETFs can only be open-ended funds.  As Hoenir describes.  So as I understand it, equalisation applies to open-ended funds.  Wondering if it is a choice by the provider for it or not?

masonic

itwasntme001 said:

masonic said:

itwasntme001 said:

masonic said:

itwasntme001 said:

Hijacking this thread for my question as it is very much related.

I have bought/sold some iShares bond ETFs (ERND, SDIG, etc.) and wondering is equalisation applies for these?  I can't see anywhere on the iShares site about this and the CTC I received from my platform does not show any equalisaiton amounts for these funds.

Quesiton is is there equalisation payments for these funds?  If not, why is it treated differently to the money market funds?

You are referring to ETFs, so no. The holder on the ex-dividend date is entitled to the whole dividend, just like any other share. You do not have to hold a share for the entire distribution period to get the dividend. Equalisation applies to open-ended funds, not exchange traded instruments.

This link seems to suggest that there are equalisation payments for ETFs:

https://www.sygnia.co.za/press/exchange-traded-funds-and-equalisation-explained

Although I think it depends whether ETFs are closed-ended or open-ended?  So yes to the latter but no to former?  Or are all ETFs open-ended?

Confusing!!

That might be true in South Africa, where that webpage is from.

From what I read ETFs can only be open-ended funds.  As Hoenir describes.  So as I understand it, equalisation applies to open-ended funds.  Wondering if it is a choice by the provider for it or not?

ETFs are exchange traded, so they are not open-ended in the conventional sense. When you buy shares in an ETF, you are buying them from a market maker. They are not being created for you by the fund manager as part of your transaction. Shares are created and cancelled through separate transactions with counterparties to avoid the ETF trading above or below NAV, but crucially shares can be valued and traded above or below NAV when this process becomes inefficient. It is rather like a discount control policy of a closed-ended fund, but occurring continuously.

If you wish to believe equalisation applies to Ireland or Luxembourg domiciled ETFs traded on LSE, then good luck finding the information related to that, because I put it to you it doesn't exist. You shouldn't have any trouble finding it for non-exchange traded investments, where equalisation does apply.

GeoffTF

masonic said:

Shares are created and cancelled through separate transactions with counterparties to avoid the ETF trading above or below NAV, but crucially shares can be valued and traded above or below NAV when this process becomes inefficient.

ETFs almost always have a significant discount/premium. You can see this on Trading View, e.g. for VEVE:

https://www.tradingview.com/symbols/LSE-VEVE/

I believe that the fund manager reports the premium/discount daily. I think I have seen it reported on RNS.

masonic

GeoffTF said:

masonic said:

Shares are created and cancelled through separate transactions with counterparties to avoid the ETF trading above or below NAV, but crucially shares can be valued and traded above or below NAV when this process becomes inefficient.

ETFs almost always have a significant discount/premium. You can see this on Trading View, e.g. for VEVE:

https://www.tradingview.com/symbols/LSE-VEVE/

I believe that the fund manager reports the premium/discount daily. I think I have seen it reported on RNS.

Currently -0.1% according to that page. Which is basically bid/offer spread, is it not?

Though for a fund like that which trades at times when underlying markets are closed, the true value of NAV must be unknown much of the time.