Invesco's (NYSE:IVZ) PowerShares unit, the fourth-largest U.S. ETF sponsor, said today that it expects 120 of its 123 ETFs will not be subject to long-term capital gains distributions this year. PowerShares joins an array of rival ETF issuers that have already made similar announcements, including iShares, the world's largest ETF issuer.
Distributions are paid to investors from the capital gains of the firm's investment portfolio. For example, when a mutual fund manager turns a profit on a trade and closes the position, the fund's shareholders, not the sponsor, are saddled with the tax liability.
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Most ETFs do not distribute capital gains to investors, which makes the asset class typically more tax efficient than mutual funds.
The three PowerShares ETFs expected to make long-term capital gains distributions to investors are the PowerShares S&P 500 BuyWrite Portfolio (NYSE:PBP), the PowerShares Active Low Duration Fund (NYSE:PLK) and the PowerShares 1-30 Laddered Treasury Portfolio (NYSE:PLW).
"At Invesco PowerShares we are proud of our product line's tax efficient track record," said Ben Fulton, Invesco PowerShares managing director of global ETFs, in a statement. "For the tenth consecutive year, we are pleased that the vast majority of PowerShares ETFs did not deliver capital gains distributions. This accomplishment highlights one of the many advantages ETFs can potentially provide shareholders seeking to maximize real returns."
Other ETF issuers to announce positive news regarding limited or no capital gains distributions include IndexIQ, Market Vectors, WisdomTree (NASDAQ:WETF) and ProShares.
Some of the most popular PowerShares ETFs are the PowerShares QQQ (NASDAQ:QQQ), the PowerShares S&P 500 Low Volatility Portfolio (NYSE:SPLV) and the PowerShares DWA Emerging Markets Technical Leaders Portfolio (NYSE:PIE).
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