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Guggenheim To Pay Cap Gains On 17 ETFs

Guggenheim To Pay Cap Gains On 17 ETFs

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Guggenheim Funds, the Lisle, Ill.-based money management firm, said it expects to have capital gains distributions on 17 of its 78 U.S.-listed ETFs at the turn of the year, with the bulk of the tax consequences focused on the fixed-income space.

ETFs are often heralded for their tax efficiency, but that doesn’t mean they are exempt from paying capital gains distributions when profits from the sale of securities have to be recorded at the fund level.

Investors have to pay federal taxes on capital gains distributions—something that’s in sharper focus these days given that an expected overhaul of the U.S. tax code next year could mean significantly higher cap gains taxes starting in 2013.

In Guggenheim’s case, 14 of the ETFs paying capital gains are bond funds, a reflection of a post-crisis environment that has seen investors pile into fixed income in one-way traffic that has limited many managers’ ability to offset cap gains through sales of available low-cost-basis securities at the portfolio level.

Indeed, other ETF providers who have already reported cap gains reinforce that trend, the latest being iShares, which said in November it would be paying cap-gains distributions on five of its bond ETFs.

BulletShares And Beyond

The company has a total of 18 bond funds in its lineup, meaning it was heavily affected by the overall bond market environment.

Indeed, that problem may be enhanced as many of the bond funds in question—such as the BulletShares target maturity funds that are among the fund with cap gains—are true buy-and-hold vehicles, meaning even fewer low-cost-basis securities are available to offset gains.

Conversely, the three equities funds saddled with cap gains puts Guggenheim right in line with the general feature of index ETFs having relatively few cap-gains distributions at the fund level.

The company has 53 equity funds, meaning that the percentage of its stock funds that will pay capital gains this year is higher than the overall industry average.

Last year, only 20 of 756 equity ETFs paid distributions—less than 3 percent of all equity ETFs, and the gains they did pay out were tiny, according to data compiled by IndexUniverse.

By comparison, Morningstar data show that 24 percent of equity mutual fund share classes made a capital gains distribution last year, and nearly two-thirds of these share classes distributed more than 2.0 percent of their assets as capital gains.

Guggenheim’s ETFs paying distributions include:

Total Distributions ($/share) Approximate % of NAV

Fund Name Beginning Range Ending Range Beginning Range Ending Range Ex-Date Pay Date
Guggenheim BulletShares 2012 Corporate Bond ETF (BSCC) 0.002 0.02 0.01% 0.10% 12/27/2012 01/02/2013
Guggenheim BulletShares 2013 Corporate Bond ETF (BSCD) 0.002 0.02 0.01% 0.10% 12/27/2012 01/02/2013
Guggenheim BulletShares 2014 Corporate Bond ETF (BSCE) 0.002 0.02 0.01% 0.09% 12/27/2012 01/02/2013
Guggenheim BulletShares 2015 Corporate Bond ETF (BSCF) 0.011 0.04 0.05% 0.18% 12/27/2012 01/02/2013
Guggenheim BulletShares 2016 Corporate Bond ETF (BSCG) 0.011 0.03 0.05% 0.13% 12/27/2012 01/02/2013
Guggenheim BulletShares 2017 Corporate Bond ETF (BSCH) 0.010 0.02 0.04% 0.09% 12/27/2012 01/02/2013
Guggenheim BulletShares 2019 Corporate Bond ETF (BSCJ) 0.001 0.01 0.00% 0.05% 12/27/2012 01/02/2013
Guggenheim BulletShares 2020 Corporate Bond ETF (BSCK) 0.030 0.04 0.14% 0.19% 12/27/2012 01/02/2013
Guggenheim BulletShares 2012 High Yield Corporate Bond ETF (BSJC) 0.100 0.12 0.39% 0.47% 12/27/2012 01/02/2013
Guggenheim BulletShares 2013 High Yield Corporate Bond ETF (BSJD) 0.030 0.04 0.12% 0.16% 12/27/2012 01/02/2013
Guggenheim BulletShares 2014 High Yield Corporate Bond ETF (BSJE) 0.041 0.06 0.16% 0.23% 12/27/2012 01/02/2013
Guggenheim BulletShares 2015 High Yield Corporate Bond ETF (BSJF) 0.010 0.02 0.04% 0.08% 12/27/2012 01/02/2013
Guggenheim Enhanced Core Bond ETF (GIY)1 0.600 0.65 1.14% 1.23% 12/27/2012 01/02/2013
Guggenheim Enhanced Short Duration Bond ETF (GSY)2 0.041 0.06 0.08% 0.12% 12/27/2012 01/02/2013
Wilshire 4500 Completion ETF (WXSP) 0.001 0.01 0.00% 0.03% 12/24/2012 12/31/2012
Wilshire 5000 Total Market ETF (WFVK) 0.001 0.01 0.00% 0.03% 12/24/2012 12/31/2012
Wilshire US REIT ETF (WREI) 0.001 0.01 0.00% 0.03% 12/24/2012 12/31/2012

Source: Guggenheim Investments

1Prior to 6/1/11, the Fund’s name was Claymore U.S. Capital Markets Bond ETF and the Fund sought to replicate an index called The Capital Markets Bond IndexSM. 2Prior to 12/511, the Fund’s name was Guggenheim Enhanced Ultra-Short Bond ETF. Prior to June 1, 2011, the Fund’s name was Claymore U.S. Capital Markets Micro-Term Fixed Income ETF and the Fund sought to replicate an index called The Capital Markets Liquidity IndexSM.

 

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