It’s that time of year again, as firms start to share their estimated cap gain distributions for their ETFs. Investors may already be aware of ETFs’ flexibility in avoiding cap gains distributions thanks to their inherent tax efficiency and use of authorized participants, but it may be time to revisit which ETFs will go without distributions this year.
While many firms still have yet to report their anticipated distributions, here are three asset managers currently estimating mostly cap-gain free ETFs for 2022.
Charles Schwab Funds
Schwab’s latest estimates show that the firm expects zero cap gains distributions for its entire ETF family for a second year running. The firm offers several U.S. and international equity index ETFs, as well as a single active semi-transparent ETF.
Within its ETF roster, several ETFs have taken in more than $1 billion in net inflows YTD, with its largest strategy by such inflows the Schwab U.S. Large-Cap ETF (SCHX), which has seen net inflows of $33 billion YTD. SCHX charges just 3 basis points for its exposures in the Dow Jones U.S. Large-Cap Total Stock Market Index, having returned 10.1% over one month, beating both the ETF Database Category Average and the FactSet Segment Average.
Schwab also offers several monthly dividend ETFs, including the Schwab U.S. TIPS ETF (SCHP) with the highest annual dividend yield among the monthly roster at 3.9%. SCHP charges 4 basis points and tracks the Bloomberg US Treasury Inflation Protected Notes Index (TIPS), seeing a recent uptick in net inflows with $5.3 million over the last five days. SCHP may be a good option for the fixed-income curious, while SCHX presents a core approach for the overall U.S. market.
American Century Investments
With just one ETF estimated to distribute capital gains as of data from October 31st, investors may want to keep an eye on the ETF suite at American Century. Just the American Century Focused Large Cap Value ETF (FLV) is estimated to distribute gains on December 20th for the firm, with $1.5358 long-term capital gains per share for the popular large cap strategy.
That leaves a slew of options for investors looking for no cap gains, with several appealing offerings to consider. For the fixed-income minded, the American Century Diversified Municipal Bond ETF (TAXF) and the American Century Diversified Bond ETF (KORP) offer different takes on the overall fixed income landscape.
The American Century Mid Cap Growth Impact ETF (MID) presents an interesting option too, with investors on the lookout for mid-caps. MID isn’t just invested in mid-cap stocks that may grow in value over time, it also specifically looks for those firms with a positive societal impact, which combined with its zero estimated capital gains distributions may make it appealing for those looking for an ESG lean at the turn of the year.
KraneShares has a few ETFs which expect to report capital gains as of October 31st, but most of its lineup currently projects not to, creating some interesting opportunities. The China specialists have a number of strategies reflecting China’s various economic subsectors that will not distribute cap gains as of now, from ESG-oriented offerings to electric vehicle and health care strategies.
Notably, the firm’s popular KraneShares CSI China Internet ETF (KWEB) is currently estimated not to distribute either short or long capital gains, with the strategy having added almost $1 billion over the last year in net inflows. KWEB tracks the CSI Overseas China Internet Index, while charging a 69 basis point fee.
Other KraneShares ETFs not expecting capital gains distributions at this time include the KFA Small Cap Quality Dividend Index ETF (KSCD) and the KraneShares Global Carbon Strategy ETF (KRBN) which focus on dividends and the global energy transition, respectively.
Cap-gain free ETFs represent an interesting opportunity for investors as the turn of the year approaches. Keep an eye on VettaFi for more as firms continue to update their estimates in the next several weeks.
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