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Dave Nadig
3:12
Different fund accountants approach the resultant timing problem differently.
3:13
Some (like, as you suggest, VWO) will adjust the NAV at 4PM based on an algo that looks at all sorts of proxies -- sometimes even ETF market prices, but also futures, proxy securities, ADRs, and so on.
They then adjust the NAV to make a best guess for fair value.
Probably should "air quotes" around that.
Why bother?
Imagine its 3PM Eastern and a tsunami hits Japan
3:14
Well, fair valuing prevents gaming that.
Someone can't come in and dump at 3PM, knowing they'll get the stale, inflated closing prices of the stocks from last night
3:15
There are actually some big examples of this happening back in the 1980s, where some funds did and some funds didn't and there were lawsuits and everything.
So with a big mutual fund, where a lot of transacting is happening at end of day, that's a sensible move, fair valueing the NAV
An ETF, on the otherhand, is trading all the time.
The market price of an ETF would get hit when news of the event happened.
3:16
So since no money is really changing hands at NAV, there's not much point in going through the motions
also, Most indexes also don't do any kind of fair value.
They just strike the close of the securities.  So by NOT fair valuing, they allow investors to measure apples to apples tracking difference.
The end result is that EEM, in this case, will show "real" tracking difference (very little) but "fake" premiums and discounts (closing price to NAV).
VWO will show the opposite -- very little premium or discount, but "fake" tracking difference.
3:17
And that's just about the most in-the-weeds thing I know about index and NAV valuation.  Congratulations.
vic di marco
3:17
I own quite a bit of AMZA stock now and planning on purchasing more. the EX divind date is usually the 20th of the month but I don't see an annucement as yet
Dave Nadig
3:17
From the super big to the super small:
3:18
So AMZA is one of the Virtus MLP ETFs.
They've actually had dates ALL OVER the place, and to heck if I know why.  Last year they did quarterly distributions.  This year they seem to be doing them monthly.
3:19
I know they made an announcement, but my suspiscion is that this has to do with when the payments come in on schedule from teh underlying MLPs
3:20
because it's a C-corp structure, there's a weird double-tax issue thats involved too.  It's worth making a phone call to make sure you really understand it.  Taxing MLPs in ETFs is one of the most complex parts of the business
and every individual fund has it's own quirks.
J. Gross
3:20
Hello Dave! On a previous Q&A session, you had mentioned that most investors should allocate a small %age of their portfolio to commodities. Can you discuss your favorite diversified Commodity ETF that you would use for this purpose?  In addition, given the new structure available for Commodity ETFs (as a 40 Act fund), as well as commodities finally performing better after a long period of under-performance, do you expect a new wave of Commodity ETFs to be issued?
Dave Nadig
3:21
So, our next issue of ETFR is on commodities, and I just wrote about the challenges here.
I could cop out and say I love all my darlings equally ...
The truth is there are a bunch of very solid approaches here.
But nobody agrees on the "default" way of indexing commodities.
3:22
Commodity indexes are HARD. Because of that, I kind of like the "just equal weight it" approach, which is what GCC (now owned by WisdomTree) does.
It's not the new structure.
The bigger downside is:  at 86 bps or 85, its expensive.
3:23
The "cheap" comparable might be something like GraniteShares COMB, which, while technically active, basically tracks the Bloomberg Index, which caps things so you don't up with the huge energy overweights of the GSCI based products that have a lot of the assets.
It's got two advantages.  The first is its shockingly cheap.
25bps if I recall
maybe 27?
cheap
3:24
The second is that it's in the new structure -- in short, the "new structure" for commodities ETFs invests through a cayman islands subsidiary, so you don't have to run the fund as a commodties pool and distribute partnership forms every year.
its a bit of fine-hair splitting about whether there's really much of a financial performance difference, but theres no question it makes dealing with your taxes VASTLY simpler than the old system
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