XIU Bleeding Assets

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pitz
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XIU Bleeding Assets

Post by pitz »

Own a bunch of XIU. Been watching the number of units outstanding over the past while, and lately its been dropping like a rock:

http://www.blackrock.com/ca/institution ... -en-ca.pdf

Jan 1, 2013 = 697.4 M units
Jan 1, 2014 = 638.8 M units
Jun 30, 2014 = 570.9 M units
Today = 487.5 M units


Also, this severe contraction appears to be creating a significant amount of realized gains in the fund. Page 4 of the above link, $554M of realized gains on fund assets ~= 5% or approximately ~$1.10 per unit (~$22).

My questions to ponder:

1) What trend might have caused XIU to shed $4B worth of assets in the past ~2 years? Vanguard and the other ETF vendors aren't exactly picking up much assets. Is this a function of lack of enthusiasm for Canadian equity investing, similar to what's been seen in the Emerging Markets ETFs such as VWO and EEM? Or something deeper that I'm not aware of? I'm not aware of other Canadian equity funds seeing such substantial outflows -- especially not a top performer like XIU.

2) Am I correct in assuming that the capital gains distribution could be especially severe this year due to the contraction of the fund and the realization of gains that must be distributed to unitholders? $1.10/unit could leave quite a tax bill! I recall Japanese mutual funds suffering this issue -- large realized capital gains distributions because the funds were shrinking, even though most of the recent investors were actually significantly underwater.


edit: Just looked at TD Canadian Index e-Series (TDB911), a TSX Composite Index-emulating fund. Its down to ~$500M. It was ~$800M of AUM last time I checked. So maybe there is a trend at play here, with Canadian investors significantly lightening up on Canadian assets.
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Re: XIU Bleeding Assets

Post by epson600 »

For comparisons sake,
XIU went from $12,503B in net assets to $10,761B, or a loss of around $1.8B

XIC increased its net assets from $1.346B to $1.930B, gain of $590M
Vanguard's Canada All Cap (VCN) went from zero to $136M
Vanguard's Canada large cap (VCE) is at $274M
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Re: XIU Bleeding Assets

Post by Bylo Selhi »

Another reason why XIU may be bleeding assets is its management fee of 15 bp. XIC's used to be higher, 25 bp IIRC, but Blackrock designated it a "core" ETF and reduced the management fee to 5 bp.

While you and I may be trapped in a CG tax liability, such is not the case for institutions like pension funds, mutual funds, etc. who are either tax exempt, hold XIU/XIC as a proxy while they look for "better" individual stocks, and/or can pass off any CGs to their investors. Presumably their move to lower cost XIC is contributing to the bleeding of assets from XIU.

I've said this before but this is a good context to repeat it, the creation unit mechanism provides a good method for an ETF sponsor to assist unitholders to switch from one ETF to another similar one with minimal tax consequences. This would allow those of us who have XIU because of our original investments in TIPS and HIPS to transition to XIC in order to benefit from the broader exposure and lower MER. (That lower MER is probably why Blackrock will never do it.)

The vast majority of XIC's assets are the same as XIU's. Investors should be able to tender shares of XIU. Those would be converted into creation units of individual stocks and then used to convert to XIC shares. Since this is mostly a share swap of identical shares there should be minimal CG tax to pay.

A similar process would apply to switching from VCE to VCN.

IANATL: There may be some obscure tax rulings to prove me wrong. But if I'm correct and Blackrock won't do it, could a third party do it on behalf of investors, perhaps charging a small fee for the service?
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Re: XIU Bleeding Assets

Post by ig17 »

Horizons S&P/TSX 60 Index ETF (HXT) lost units too.

Dec 31, 2013: 35,908,193
Today: 25,527,939

10.4M units gone, or about 29% of units outstanding at the start of the year.

So both XIU and HXT have bled assets.

I'm guessing it's US money leaving Canada due to a combination of factors:

1. dropping Canadian dollar.
2. negative sentiment towards commodities, primarily oil and gold.
3. the risks associated with overvalued Canadian real estate and overextended Canadian consumer.
...
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Re: XIU Bleeding Assets

Post by pitz »

Bylo Selhi wrote: I've said this before but this is a good context to repeat it, the creation unit mechanism provides a good method for an ETF sponsor to assist unitholders to switch from one ETF to another similar one with minimal tax consequences. This would allow those of us who have XIU because of our original investments in TIPS and HIPS to transition to XIC in order to benefit from the broader exposure and lower MER. (That lower MER is probably why Blackrock will never do it.)
Any idea why the fund itself is receiving so much in the terms of capital gains attributed to it, when redemptions presumably are done "in-kind" per the creation/destruction process? One would think, when a fund like this shrinks, arbitrageurs would simply do an in-kind redemption, receive shares at an average cost base equal to that of the fund, and then sell those shares on market. So why is the fund itself ending up with so much in terms of realized CG?

Perhaps the tax rules in Canada for in-kind redemptions are significantly different than the tax rules in the USA? Maybe ETFs aren't as tax efficient in Canada as they are in the US. I guess I'm speculating at this point, and who knows what the 2nd half's numbers will look like, but since there's been shrinkage of another ~100M units, the distributed CG number could be in the $2+ range.
The vast majority of XIC's assets are the same as XIU's. Investors should be able to tender shares of XIU. Those would be converted into creation units of individual stocks and then used to convert to XIC shares. Since this is mostly a share swap of identical shares there should be minimal CG tax to pay.
Well ~10-20% of XIU's assets (per unit) would have to be sold, and replaced with the XIC "stuff". But I get your point.

IANATL: There may be some obscure tax rulings to prove me wrong. But if I'm correct and Blackrock won't do it, could a third party do it on behalf of investors, perhaps charging a small fee for the service?
On a practical level, 17bp vs. 5bp is so trivial, and who knows if XIC will even remain at the 'sale' price for management over the long term. I guess the dividend yield, @ 3% or whatever it is these days, could be rolled into new XIC units instead of re-invested in XIU, for an investor in the accumulation phase.
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Re: XIU Bleeding Assets

Post by pitz »

ig17 wrote: I'm guessing it's US money leaving Canada due to a combination of factors:
...
Do US investors buy Canadian-domiciled ETFs, or do they buy, for instance, a US-domiciled Canadian ETF like EWC?

I know with EWC, you get a nice set of US-compliant accounting which tells you how much of the dividends are "qualified", long-term CG, short-term CG, etc. While an US resident buying XIU or HXT, wouldn't have the benefit of any of that accounting, and would have to declare it as ownership of a foreign trust to the IRS, with tax consequences flowing from such. Not to mention Canadian with-holding tax. Anyone know more about this, ie: the tax consequences of a US resident buying Canadian ETFs?
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Re: XIU Bleeding Assets

Post by ig17 »

When I referred to US money leaving, I meant *institutional* US money. I was just guessing.

StatsCan numbers don't support my thesis.

See Chart 2: Foreign investment in Canadian securities
http://www.statcan.gc.ca/daily-quotidie ... ng.htm?HPA

Red bars (equities) show fund inflows 10+ months in a row.
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Re: XIU Bleeding Assets

Post by ig17 »

BMO Global Asset Management Canadian ETF Outlook Mid-Year 2014
BMO wrote: The Canadian ETF industry has had a strong start to 2014, with over $3.1 billion in inflows and reaching $70.1 billion in assets under management (AUM), an increase of 11.1% over year end 2013. Equity ETFs have steadily added $529 million in inflows, as investors use ETFs for both strategic and tactical positions. The big surprise has been the strong demand for fixed income as investors added over $2.5 billion in inflows.
There you go, another possible explanation: a rotation from equities to bonds.
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Re: XIU Bleeding Assets

Post by Bylo Selhi »

pitz wrote:Well ~10-20% of XIU's assets (per unit) would have to be sold, and replaced with the XIC "stuff". But I get your point.
Even at 10% to 20% non-overlap that still leaves 80% to 90% of the swap that's tax sheltered. For someone who's held XIU for many years that's not chopped liver.

On a practical level, 17bp vs. 5bp is so trivial
Trivial to smaller players perhaps. But consider someone (not me!) who owns a creation unit (50,000 shares) of XIU. That's over $1M (50k x $22) so a 12 bp difference is $1,200 per year. To an institutional trader who's probably sitting on 10 or more creation units that's worth a switch, especially when there are no tax consequence and spreads are 1¢ or 2¢ a share (i.e. a one time 5 or 10 bp.)
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Re: XIU Bleeding Assets

Post by pitz »

On a practical level, 17bp vs. 5bp is so trivial
Trivial to smaller players perhaps. But consider someone (not me!) who owns a creation unit (50,000 shares) of XIU. That's over $1M (50k x $22) so a 12 bp difference is $1,200 per year. To an institutional trader who's probably sitting on 10 or more creation units that's worth a switch, especially when there are no tax consequence and spreads are 1¢ or 2¢ a share (i.e. a one time 5 or 10 bp.)
Did the management fee rebates that Barclays used to offer, go away? 10 years ago, 17bp was so revolutionary and way ahead of its time. Now its, well, been usurped, although there's no telling how long the funds that charge 5bp or the ones that claim to have no MER can stay in business as viable entities.

If the masses (well, that's a relative term when it comes to index funds and ETFs) have fled/are fleeing, isn't that an incredibly bullish sign that there's still quite a substantial ways up to go? As opposed to the scenario, at a top, when everyone is all-in, leveraged to the gills, like we seem to have in the residential RE market at the moment?
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Re: XIU Bleeding Assets

Post by pitz »

ig17 wrote: There you go, another possible explanation: a rotation from equities to bonds.
Indeed, I think so many of us have heard, from investors, the phrase, "as soon as it gets back to even, I'll sell and switch to bonds". Only recently did XIU reach its 2008 high, and has actually fallen beneath such again (although almost back in the past week). Very plausible. Classic performance chasing, I guess, with the usual consequences.
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Re: XIU Bleeding Assets

Post by like_to_retire »

I do find it curious that so many FWF members are so convinced that ETF Index investing is the only way to go in Canada, and yet they accept the rather high risk of having absolutely no control over their capital gains liabilities.

In addition, there's a laundry list of surprise taxes at years end of Non-eligible Dividends, Special Dividends, ROC, Foreign Income, Interest Income and Re-invested Distributions, on top of an MER eight ball and premium/discounts to NAV. I know there's some often quoted saying about taxes and tail waging, but geez, how hard is it to pick a few stocks and be free of that nonsense.

I remember back in 2005 (I believe) when ishares changed XIC with respect to its XIU/XIC blue chip status, and they issued taxable re-invested capital gains to the tune of 8 or 9%. If you had a few hundred thousand of XIC at that time, the tax bill was quite the surprise. I was shocked. It changed my outlook on ETF's forever.

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Re: XIU Bleeding Assets

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like_to_retire wrote:I do find it curious that so many FWF members are so convinced that ETF Index investing is the only way to go in Canada, and yet they accept the rather high risk of having absolutely no control over their capital gains liabilities.
In my own circumstances, it won't be an issue, the taxes. As I did a swap from XIU to XIC, and back to XIU a month later, pretty close to the ugly bottom in 2009, to lock in a huge (carry-forward-able) capital loss and reduce my XIU cost base.

A secondary issue is that, as the TFSA picks up steam, and RRSPs, how many people are really going to be investing in taxable accounts?
In addition, there's a laundry list of surprise taxes at years end of Non-eligible Dividends, Special Dividends, ROC, Foreign Income, Interest Income and Re-invested Distributions, on top of an MER eight ball and premium/discounts to NAV. I know there's some often quoted saying about taxes and tail waging, but geez, how hard is it to pick a few stocks and be free of that nonsense.
Picking a few stocks is going to have those same problems as well, more or less. Perhaps even worse as people have to spend significant resources deliberating, for instance, whether or not they should make an election in a takeover deal (ie: the Loblaws/Shoppers deal, or now, the Burger King/Tim Hortons deal) for cash, shares, etc. And just how do you get the desired diversification from "a few stocks"? What about exposure to out-of-favour countercyclical sectors that ETFs often give you, but stock pickers often ignore as "uninteresting"?

I personally justify owning XIU versus the 60 individual stocks, because the cost/aggravation of keeping track of that many stocks far outweighs the MER. And I'm not really sure I'd be diversified very well if I cut down to a subset of that, at least as far as Canada's concerned. Because my cost base is so relatively low, its prohibitive to "switch" to XIC or Vanguard without a sort of in-kind swap as theorized by Bylo above.
I remember back in 2005 (I believe) when ishares changed XIC with respect to its XIU/XIC blue chip status, and they issued taxable re-invested capital gains to the tune of 8 or 9%. If you had a few hundred thousand of XIC at that time, the tax bill was quite the surprise. I was shocked. It changed my outlook on ETF's forever.
TD's relatively ugly, investor un-friendly wind-up of their ETF operations comes to mind as well. Unfortunately, that 8 or 9% scenario is what its looking like for XIU today.
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Re: XIU Bleeding Assets

Post by like_to_retire »

pitz wrote: And just how do you get the desired diversification from "a few stocks"?
hehe, you're being literal. OK, let's say ten to twenty. Easy.
pitz wrote:as the TFSA picks up steam, and RRSPs, how many people are really going to be investing in taxable accounts?
Sure, for the future, but many here at FWF are retired and have the majority (myself included) in taxable accounts. I'll be dead before my TFSA is anything more than a rounding error, and RRSP's have no more room after retirement.

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Re: XIU Bleeding Assets

Post by jaguar »

pitz wrote:Do US investors buy Canadian-domiciled ETFs, or do they buy, for instance, a US-domiciled Canadian ETF like EWC?

I know with EWC, you get a nice set of US-compliant accounting which tells you how much of the dividends are "qualified", long-term CG, short-term CG, etc. While an US resident buying XIU or HXT, wouldn't have the benefit of any of that accounting, and would have to declare it as ownership of a foreign trust to the IRS, with tax consequences flowing from such. Not to mention Canadian with-holding tax. Anyone know more about this, ie: the tax consequences of a US resident buying Canadian ETFs?
Fidelity Canada claims that most Canadian ETFs are Passive Foreign Investment Companies (PFICs) under US tax laws. The reporting requirements are especially onerous and the taxation so punitive that most taxable US persons should avoid investing in them.

https://www.fidelity.ca/cs/Satellite/en ... ments/pfic
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Re: XIU Bleeding Assets

Post by Bylo Selhi »

pitz wrote:Did the management fee rebates that Barclays used to offer, go away? 10 years ago, 17bp was so revolutionary and way ahead of its time. Now its, well, been usurped, although there's no telling how long the funds that charge 5bp or the ones that claim to have no MER can stay in business as viable entities.
Actually before Barclays took over the predecessor ETFs, TIPS and HIPS were operated by the TSX (then known as the TSE) on a no-profit basis. The effective MER at that time was something like 2 bp.
like_to_retire wrote:I do find it curious that so many FWF members are so convinced that ETF Index investing is the only way to go in Canada, and yet they accept the rather high risk of having absolutely no control over their capital gains liabilities.

No wonder you're so curious and confused. Those claims are total bullshit. Few FWFers are "convinced" that ETF index investing the only way to go. Rather many find that it's an efficient and effective way to invest that beats the vast majority of actively-managed funds the vast majority of the time. Even your claim that indexers have "absolutely no" control over capital gains and other taxes is bogus since as pitz mentioned one can take distributions in cash and reinvest them in something else.
In addition, there's a laundry list of surprise taxes at years end of Non-eligible Dividends, Special Dividends, ROC, Foreign Income, Interest Income and Re-invested Distributions, on top of an MER eight ball and premium/discounts to NAV. I know there's some often quoted saying about taxes and tail waging, but geez, how hard is it to pick a few stocks and be free of that nonsense.
How does picking individual stocks avoid these "surprise taxes"? A company can change its business model and/or corporate structure so as to incur most if not all of the above. If that happens you too face CGs if you choose to bail out.
I remember back in 2005 (I believe) when ishares changed XIC with respect to its XIU/XIC blue chip status, and they issued taxable re-invested capital gains to the tune of 8 or 9%. If you had a few hundred thousand of XIC at that time, the tax bill was quite the surprise. I was shocked. It changed my outlook on ETF's forever.
The sort of risk exists with non-indexed investments whether held in funds or self-managed as individual stocks. A simple example is a company you own gets bought for cash. And depending on how well it performed while you owned it the CGs could be 100% or even more. (After all it must have been a good stock at a reasonable price if you bought it and then later an acquisitor saw the wisdom of your ways and paid substantially more than you did ;))
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Re: XIU Bleeding Assets

Post by like_to_retire »

Bylo Selhi wrote:Those claims are total bullshit.
hehe, a little harsh, but everyone sees things a different way.
Bylo Selhi wrote:If that happens you too face CGs if you choose to bail out.
Yep, and you've made my point. I can choose. I have control over my capital gains liabilities.

Member Pitz sites "the Burger King/Tim Hortons deal)". I can decide if I want to sell or stay with THI. You lose that control with an ETF. They will decide for you, and in the middle of December all the ETF owners will be waiting with baited breath for the tax letter to see what their bill will be for the year. Myself, I'll wait until the end of February, and I'll already know exactly what my simple T5 dividends slip will be, because I had control.

The very fact that this thread exists, makes my point.

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Re: XIU Bleeding Assets

Post by chufinora »

This is a bit of an eye opener for me. I am not sure if I understand this - let's see

XIU has had net redemptions this year, at same time the stocks held have increased in value, thus they have had to sell holdings incurring capital gains. This is passed on to remaining shareholders (Those remaining at year-end or anyone holding XIU during the year? - pro-rated or how distributed?). This could amount to 7-8% of value of your XU holdings!!!?

Is this a correct synopsis? When XIU posts it performance I guess it would not include this - but this would represent a significant offset to the benchmark performance - and I don't see any +ve opposite where it cannot be negative, you either incur this CG or you don't in a year. Kind of kiboshes the mantra that broad ETF's return the market minus the MER.

Definitely a huge negative consideration to holding an ETF in a taxable account (Which I did briefly a few years ago)
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Re: XIU Bleeding Assets

Post by max88 »

Why asset expansion or contraction has anything to do with cap gain of ETF units? When investor John sells XIU he will have a cap gain or cap loss base on his own ACB and disposal price, while investor Jane picks up the units with new ACB, still while other XIU unit holders hang on tight with. The unit ACB may change due to ROC of underlying stocks.

Even if John has significant units of XIU, and takes them to Blackrock to exchange for underlying stocks, then sell in the open market, the cap gain/loss only applies to John.

Can someone please explain how "XIU bleeding assets" can result in cap gain for existing unit holders?
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Re: XIU Bleeding Assets

Post by Bylo Selhi »

like_to_retire wrote:hehe, a little harsh, but everyone sees things a different way.
I call 'em as I see 'em. When I see something that so blatantly mischaracterizes indexing... well let the chips fall where they may.
Yep, and you've made my point. I can choose. I have control over my capital gains liabilities.
You can choose but what sort of choice do you really have? If you hold then you get hit with whatever negative tax consequences happen (cash, dividends, etc.) and if you sell you get hit with CG taxes.

Likewise you can choose to hold a relatively small number of stocks compared to an ETF or fund. But then your concentrated holdings put you at greater risk of substantial loss if one of those companies gets into serious trouble. As with all investing styles there are both advantages and disadvantages, and risks come from differing sources.
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Re: XIU Bleeding Assets

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max88 wrote:Why asset expansion or contraction has anything to do with cap gain of ETF units? When investor John sells XIU he will have a cap gain or cap loss base on his own ACB and disposal price, while investor Jane picks up the units with new ACB, still while other XIU unit holders hang on tight with. The unit ACB may change due to ROC of underlying stocks.
Presumably because the fund itself has to divest assets as the outstanding unit issuance shrinks, and those assets may be appreciated. In the case of XIU, there are a fair number of long-term holdings that have gone up considerably from the average cost base.

AFAIK, all of the Canadian index products that have shrunk, will suffer this. Including TD Canadian Index [e-Series or not].

Apparently the whole mechanism of John trading units for shares at his own cost base doesn't seem to work out that way, if the fund itself is, in its accounting, realizing CG.
Can someone please explain how "XIU bleeding assets" can result in cap gain for existing unit holders?
Assets have to be sold out of the trust to satisfy redemption requests. Capital gains are realized. Mutual fund trusts (ie: XIU is an example of a Mutual Fund Trust) are required, by law, to attribute capital gains to beneficiaries (but are not allowed to attribute losses).

Since XIU is at its all time high, or within a stone's throw, practically nobody will be able to merely sell and realize a capital loss on their personal ownership of XIU to offset the trust gain.

Of course, everyone who owns stocks and mutual fund trusts, should realize that indefinite tax deferral is not realistic.
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Re: XIU Bleeding Assets

Post by AltaRed »

Not so fast. Note this paragraph from Morningstar:
The second reason that has made ETF tax efficiency seem almost legendary is how the funds deal with outflows, or investor redemptions. When mutual funds have outflows, they have to sell holdings to generate cash and also pass on any realized capital gains to fund investors. When ETFs have outflows, they conduct an in-kind transaction, exchanging holdings for ETF shares, which are then "destroyed." ETFs can select which shares to exchange, which allows it to swap out its shares with the lowest cost basis, thereby purging securities with embedded capital gains from the portfolio. Because these are in-kind transactions, and not cash transactions, capital gains are not realized.
I suspect at some major redemption level, cap gains would have realized but figuring that out is past my pay grade.
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Re: XIU Bleeding Assets

Post by pitz »

chufinora wrote:This is a bit of an eye opener for me. I am not sure if I understand this - let's see

XIU has had net redemptions this year, at same time the stocks held have increased in value, thus they have had to sell holdings incurring capital gains. This is passed on to remaining shareholders (Those remaining at year-end or anyone holding XIU during the year? - pro-rated or how distributed?). This could amount to 7-8% of value of your XU holdings!!!?
That's my read of it, based on the accounting statement of the trust "realizing" capital gains on disposal of assets to the tune of approximately $555M just in the 1st Half. Why else would the trust be realizing CG? The TSX60 index hasn't seen that much turnover this year (Shoppers Drug Mart is the only deal I'm aware of, and Shoppers was barely 1% of the index!).

Is this a correct synopsis? When XIU posts it performance I guess it would not include this - but this would represent a significant offset to the benchmark performance - and I don't see any +ve opposite where it cannot be negative, you either incur this CG or you don't in a year.
You get to adjust your own personalized cost base of your individual units upwards by the amount of the distribution. So its not a total loss, although if you have to dig into your pocket and fork up $$$ because you have no capital losses in reserve, that can be painful.

Of course, significant distributed capital gains are pretty much par for the course on the active managed funds that make big gains in a year, because they do so with active trading strategies.
Kind of kiboshes the mantra that broad ETF's return the market minus the MER.
To a non-taxable investor, ie: a RRSP, RESP, TFSA, RPP trust, the mantra holds absolutely true. What we're discussing is a matter of tax efficiency for the taxable investor who bought XIU with the view of long-term deferral of capital gains tax on appreciated units.
Definitely a huge negative consideration to holding an ETF in a taxable account (Which I did briefly a few years ago)
Oh, it would be a huge shocker for someone if they bought towards the end of the year, didn't actually see their units go up, but have this big distribution. The Japanese-asset Canadian mutual funds did quite a bit of this. Even the Canadian Nasdaq funds that shrunk so much after the 2000 tech bubble did this as well. Unit values cratered, and the remaining holders were slammed with tax based on gains that many of them personally didn't experience, resetting their costs bases considerably higher than even their purchase price.
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Re: XIU Bleeding Assets

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AltaRed wrote:Not so fast. Note this paragraph from Morningstar:
The second reason that has made ETF tax efficiency seem almost legendary is how the funds deal with outflows, or investor redemptions. When mutual funds have outflows, they have to sell holdings to generate cash and also pass on any realized capital gains to fund investors. When ETFs have outflows, they conduct an in-kind transaction, exchanging holdings for ETF shares, which are then "destroyed." ETFs can select which shares to exchange, which allows it to swap out its shares with the lowest cost basis, thereby purging securities with embedded capital gains from the portfolio. Because these are in-kind transactions, and not cash transactions, capital gains are not realized.
I suspect at some major redemption level, cap gains would have realized but figuring that out is past my pay grade.
The link you cite is exactly how I thought it worked. But the accounting statement given by XIU (see first post, page 4) implies that the fund has realized $555M of gains (in the 1st half), in addition to the expected unrealized gains.

So I'm confused now as to why the fund would be realizing gains, if such treatment as described by the Morningstar is actually the case. XIU shouldn't be selling anything, and shouldn't be realizing any gains, if investors can merely redeem in-kind. Other than, of course, sales necessitated by index rebalancing, of which there has been minimal activity this year except for Shoppers/Loblaws, much of which was rolled over tax-free anyways.
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StuBee
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Re: XIU Bleeding Assets

Post by StuBee »

I am not an expert on ETF's, but I think that something is being misunderstood here. When an authorized dealer who holds XIU requests from Blackrock the underlying securities in exchange for his units, a capital event has not taken place. His XIU is whatever XIU contains at the time that dealer makes his request. The 554M$ of realized capital gains must be for some other reason... (which I must say is rather intriguing...)

Furthermore, I do not see how an ETF can selectively divest itself of "shares with the lowest cost base" without skewing the index that it is covenanted to follow.
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