- How To Tell If Your ETF Is About To Close

How To Tell If Your ETF Is About To Close

Written by Wilfred Ling

Saturday, 07 November 2009

Here is an article on How To Tell If Your ETF Is About To Close. The basic point to note is that it depends on:

(1) Fund size

(2) Time which the fund has been in the market

(3) Liquidity

(4) Regulatory risk

(5) Performance either in absolute return or relative return compared with peers

ETF fund closure can be potentially a more damaging event compared to a unit trust fund closure for a Singapore resident. The reason is because if the ETF is located in an offshore jurisdiction, the fund closure can cause an unwanted tax event wiping out a large part of the capital. For instance, if an ETF is listed in US invested by a Singapore resident, the closure causes a force SELL but appears to be a distribution. This may cause a 30% tax on this distribution. Thus, to prevent any surprises, my advice is to always invoke a SELL on the ETF yourself before the fund closure date.

Comments

Add New