55% of Investors Surveyed Misunderstood Potential Tax Implications of
ETFs
BlackRock Announces Estimated Year-End Capital Gains Distributions:
Zero Capital Gains Distributions Expected for 98% of iShares ETFs
SAN FRANCISCO--(BUSINESS WIRE)--
At a time when U.S. tax-payers are facing potential rate increases, many
investors still misunderstand the tax implications associated with
exchange traded funds (ETFs) according to a recent study conducted on
behalf of BlackRock, Inc. (NYSE: BLK). Of the 845 end investors who own
or share household financial investment decision-making responsibilities
surveyed, 55 percent of respondents were not aware that an ETF could pay
capital gains even if the security was not sold at a gain that year.1
BlackRock also announced today that 98 percent of ETFs offered by its
iShares® ETF business are not expected to pay capital gains
distributions. iShares is the largest manager of ETFs with 280 products
listed in the United States. Over the last ten years, iShares has not
paid capital gains 98 percent of the time.2
“While ETFs can be highly tax-efficient investment products, many
investors are surprised to find out that it’s possible to owe taxes on
capital gains distributions made by ETFs even if they didn’t sell the
security at a gain that year,” said Patrick Dunne, iShares Head of
Global Markets & Investments. “When it comes to tax efficiency,
investors need to be asking the right questions or they may get a
surprise in their tax bill at the end of the year.”
Capital gains in mutual funds and ETFs occur for the same reason they
occur in individual portfolios—the fund has sold securities at a profit
or generated income on holdings at some point during the year. Funds are
required to distribute those gains, which are subject to taxes by the
federal government, to shareholders by December 31 each year.
Key questions to ask your financial advisor about
the ETFs in your portfolio:
-
What is the track record of my ETF holdings? Have they made capital
gains distributions in the past?
-
Which asset classes will be most likely to generate capital gains
distributions this year? How can I find out if my ETF is paying out a
capital gain?
-
What should I do if I find out my ETF is paying out capital gains?
Dunne continued, “In a year when many ETF providers are paying out
capital gains, including a significant number of bond ETFs, iShares has
once again delivered professional quality products with a high level of
tax efficiency which ultimately benefits our investors.”
Only five of 280 iShares ETFs are scheduled to pay capital gains
distributions this year:
|
Fund
(Ticker)
|
|
|
Estimated Total Cap Gain
Distribution ( % of NAV in
bps)
|
|
|
Ex Date
|
|
|
Distribution
Date
|
|
iShares Core Total U.S. Bond Market ETF (AGG)
|
|
|
35 – 44 bps
|
|
|
12/3/12
|
|
|
12/7/12
|
|
iShares Barclays GNMA Bond Fund (GNMA)
|
|
|
53 – 65 bps
|
|
|
12/3/12
|
|
|
12/7/12
|
|
iShares iBoxx $ Investment Grade Corporate Bond Fund (LQD)
|
|
|
0 – 1 bps
|
|
|
12/3/12
|
|
|
12/7/12
|
|
iShares Barclays MBS Bond Fund (MBB)
|
|
|
19 – 23 bps
|
|
|
12/3/12
|
|
|
12/7/12
|
|
iShares Financials Sector Bond Fund (MONY)
|
|
|
45 – 55 bps
|
|
|
12/3/12
|
|
|
12/7/12
|
|
|
|
|
|
|
|
|
|
|
|
This information represents an estimate of the distribution per share as
of 11/09/12. The ex-date for the funds, or the date when the capital
gains distribution is deducted from the funds’ assets and set aside for
payment to shareholders, is December 3, 2012, – Distributions will be
paid on December 7, 2012. This estimate does not take into account any
possible tax reclassifications, nor does this estimate contemplate
changes in income or shares outstanding that may occur prior to record
date. This estimate is for informational purposes only. Please consult
your tax professional or financial advisor for more information
regarding your tax situation.
About BlackRock
BlackRock is a leader in investment management, risk management and
advisory services for institutional and retail clients worldwide. At
September 30, 2012, BlackRock’s AUM was $3.673 trillion. BlackRock
offers products that span the risk spectrum to meet clients’ needs,
including active, enhanced and index strategies across markets and asset
classes. Products are offered in a variety of structures including
separate accounts, mutual funds, iShares® (exchange traded funds), and
other pooled investment vehicles. BlackRock also offers risk management,
advisory and enterprise investment system services to a broad base of
institutional investors through BlackRock Solutions®. Headquartered in
New York City, as of September 30, 2012, the firm has approximately
10,400 employees in 29 countries and a major presence in key global
markets, including North and South America, Europe, Asia, Australia and
the Middle East and Africa. For additional information, please visit the
Company's website at www.blackrock.com.
About iShares
iShares is a global product leader in exchange traded funds with over
600 funds globally across equities, fixed income and commodities, which
trade on 20 exchanges worldwide. The iShares Funds are bought and sold
like common stocks on securities exchanges. The iShares Funds are
attractive to many individual and institutional investors and financial
intermediaries because of their relative low cost, tax efficiency and
trading flexibility. Investors can purchase and sell shares through any
brokerage firm, financial advisor, or online broker, and hold the funds
in any type of brokerage account. The iShares customer base consists of
the institutional segment of pension plans and fund managers, as well as
the retail segment of financial advisors and high net worth individuals.
Carefully consider the iShares Funds’ investment objectives, risk
factors, and charges and expenses before investing. This and other
information can be found in the Funds’ prospectuses, which may be
obtained by calling 1-800-iShares (1-800-474-2737) or by visiting www.iShares.com.
Read the prospectus carefully before investing.
Investing involves risk, including possible loss of principal. Transactions
in shares of the iShares Funds will result in brokerage commissions and
will generate tax consequences. iShares Funds are obliged to distribute
portfolio gains to shareholders. Shares of the iShares Funds may be sold
throughout the day on the exchange through any brokerage account.
However, shares may only be redeemed directly from a Fund by Authorized
Participants, in very large creation/redemption units.
The iShares Funds are distributed by BlackRock Investments, LLC
(together with its affiliates, “BlackRock”).
An investment in the fund(s) is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency.
All registered investment companies, including iShares Funds, are
obliged to distribute portfolio gains to shareholders at year’s end
regardless of performance. Transactions in shares of the iShares Funds
will also generate tax consequences and transaction expenses. The
information provided is not intended to be tax advice. Tax consequences
of dividend distributions may vary by individual taxpayer.
To receive a distribution, you must be a registered shareholder of the
fund on the record date. Distributions are paid to shareholders on the
payment date. Past distributions are not indicative of future
distributions. Please consult your tax professional or financial advisor
for more information regarding your tax situation.
BlackRock does not provide tax advice. Please note that (i) any
discussion of U.S. tax matters contained in this communication cannot be
used by you for the purpose of avoiding tax penalties; (ii) this
communication was written to support the promotion or marketing of the
matters addressed herein; and (iii) you should seek advice based on your
particular circumstances from an independent tax advisor.
The iShares Funds are not sponsored, endorsed or issued Markit Indices
Limited, nor are they sponsored, endorsed or issued by Barclays Capital
Inc. Neither of these companies make any representation regarding the
advisability of investing in the Funds. BlackRock is not affiliated with
the companies listed above.
1 Survey of 845 end investors who own/share financial
investment decision-making in his/her household was conducted during
October 2012 by Market Strategies on behalf of BlackRock.
2 Source: BlackRock, as of 11/12. Past distributions are
not indicative of future distributions.
BlackRock
Diane Henry, 415-670-4567
diane.henry@blackrock.com
Melissa
Garville, 212-810-5528
melissa.garville@blackrock.com
Source: BlackRock, Inc.