2009, Less Taxing Year for ETF Investors
December 30, 2009

SAN DIEGO (ETFguide.com) - ETFs once again lived up to their much deserved reputation of high tax efficiency in 2009. This was especially good for investors that owned funds in asset classes like commodities and emerging markets where performance gains were sharply higher.

Another positive surprise for ETF investors was zero capital gains distributions from leveraged ETF families like ProShares and Rydex SGI.

"While we manage ProShares to minimize capital gain distributions, a myriad of factors may impact the level of capital gains that tax regulations require to be distributed," said Michael L. Sapir, Chairman and CEO of ProShare Advisors LLC, ProShares' investment advisor."These factors include, among other things, the path of the underlying index during the period and the size and the timing of asset flows.”

2009’s relative calm compared to 2008’s market storm provided much relief across the board for ETF families.

ETFs generally pay out minimal capital gains because of their low portfolio turnover along with their ability to minimize portfolio gains by getting rid of securities with a low cost basis to authorized participants. Also, ETF shareholders don’t get stuck with the tax bill of exiting ETF shareholders which provides a significant advantage compared to traditional mutual funds.  

As of early December, there were 819 ETFs with roughly $745 billion in assets and 89 ETNs (exchange-traded notes) with $8.2 billion.

Here’s a quick summary of 2009 tax distribution data from key ETF families:

--All 31 Rydex SGI ETFs paid zero capital gains distributions
--All 77 ProShares’ leveraged and short ETFs paid zero capital gains distributions
--All five IndexIQ ETFs paid zero capital gains distributions
--All six Charles Schwab ETFs paid zero capital gains distributions
--All nine Select Sector SPDR ETFs paid zero capital gains distributions
--Just one of 42 equity ETFs from WisdomTree paid capital gain distributions
--Just one of 115 InvescoPowerShares ETFs paid capital gains distributions
--Just three of the 39 Vanguard ETFs paid capital gains distributions
--Just three of 23 of the Van Eck ETFs paid capital gains distributions
--Just six of 186 iShares paid capital gains distributions
--11 of 22 Direxion Shares ETFs paid capital gains distributions
--12 of the 89 SPDR ETFs paid capital gains distributions