(ETF) Anniversaries and Taxes

As we celebrate the holiday season and ponder what we are thankful for, it’s also time to take stock of one’s investments. Here, David Mann, Head of Global Exchange-Traded Funds (ETFs) Capital Markets, opines on an ETF anniversary he’s thankful for—and offers some tax-planning food for thought.

My loyal readers will know that two other anniversaries occur right around this time of year:

  • The anniversary of our single-country ETF lineup which first launched in November of 2017. Happy 4th Birthday!
  • The annual discussion on tax-loss harvesting (here is the link to last year’s post).

Now, usually I do not discuss these two seasonal events together but am changing my tune on the back of a recent client conversation (I will get to that in a second.) First, the growth of our passive lineup has been a very nice success story. Our 23 single country and regional funds are now closing in on $2.5 billion of combined assets with almost $1 billion of inflows in 2021 alone.1

There is no argument that the vast majority of these funds provide exposure to single countries and regions at a fraction of the cost when compared to the largest ETF in their Morningstar category that provide equivalent exposure. On average, our passive funds are 40 basis points (bps) cheaper and have the potential to provide a noticeable compounding effect on performance.2

That does not mean we do not have any pushback from investors when considering one of our single country funds. In the early days, most questions centered on trading and liquidity. I would like to think that we have now seen enough trading examples to put those concerns to bed once and for all. Look no further than the recent trading and subsequent inflows we have seen this year. In fact, I might even put out a separate whitepaper that highlights the ease of trading these funds!