Happy Friday to Everyone!
One of the several nuances that make ETFs unique is there method of coming into and going out of existence – the
process of Creation and Redemption. Before
ETFs and for many years, discussions surrounded Closed-End -Funds, and now
ETFs, about the price level at which a particular fund may trade in comparison
to the Net Asset Value of its constituents. Generally, from here we would begin the discussion of arbitrage, market inefficiency
and the like – but for the purpose of this post, let’s step back and look high
level at this overall landscape within the world of ETFs.
Average & Just
about at NAV: The average
premium/discount across the universe of ETFs (not ETNs) is a discount of
.14%. Averages are hardly helpful
statistics when looking at large distributions like this, so let’s delve in a
little deeper. The vast majority of ETFs
trade incredibly close to their respective Net Asset Values. How close,you ask? Of the approximate 1,230 ETFs that we track
daily, 818 or about 67% trade within 1% of their respective NAV.
At a Discount: As of yesterday, there were 519 ETFs trading
at various levels of discount with the preponderance of those trading at very
minor discounts. Specifically, 491 ETFs
traded at discounts to their NAV of 5% or less, with only 15 ETFs trading at
discounts between 5% and 10% and 9 other
ETFs, most with unique stories, trading with discounts of 10% or greater.
At a Premium: As you would expect, the story is similar on
the positive side of the distribution axis. There are 702 ETFs that trade at
various premiums to their respective NAVs – about 10 actually trade precisely,
at least 3 decimal places, at their NAV.
Similar to the discount group, the vast majority of these Premiums are less than 5% and represent 688 of these ETFs, with 10 ETFs trading at premiums
between 5% and 10% and a couple of special situation ETFs with premiums above
10%.
The best way to incorporate this data point into your ETF
research and selection is to start with the ETFG Scanner, then go to Filters and simply check the Discount/Premium box under Display Fields. This will add a column in the display for NAV Discount/Premium.
Have a terrific weekend and thank you for reading ETF
Global Daily Perspectives.
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