The chart below shows the dividend, the capital gain and the impact it had on the price of each ETF. I have chosen to use just a few ETFs as an illustration of the general situation though there was a total of 35 ETFs that went ex today (see the full list at the ProShares site).
|Fund Name||Ticker||Dividend||S.T. Cap Gain||Closing price 12/22/2008||ex-dividend price||percent change|
|UltraShort Basic Materials||SMN||0.008847||26.57907||69.48||42.89||38%|
|UltraShort Consumer Services||SCC||0.008631||33.91358||124.92||91.00||27%|
|UltraShort Real Estate||SRS||0.023996||4.56656||61.03||56.44||8%|
You can see that the combination of the dividend and the short term capital gain had a large effect on the price of each ETF. Reductions in price ranged from 8% to 38%.
It's true that investors receive the income from this action. The problem is that the money is taxable and ProShares gave little warning that today was the ex-dividend date. They made the announcement last night and today it took effect. For those who were holding the ETFs for just a few days or as a quick overnight trade there was no opportunity to sell the ETFs beforehand - they are now stuck paying taxes on the capital gains.
Why are the distributions so big? As it says on the ProShares site, all ETFs are required by the IRS to distribute substantially all of their income and capital gains to shareholders at least annually.
So here is another aspect of the ProShares ETFs that investors need to be cautious about. As if these ETFs weren't volatile enough already.