VGAD paid a very handsome dividend yesterday, significantly larger than the one paid by VGS, which theoretically holds identical shares, but is not currency hedged like VGAD. Therefore, assuming the hedging caused this dividend payout, was this the result of CGT on the hedging or something else? Thanks in advance.
Yes and unfortunately as VGAD is not registered for ToFA, it is classed as a dividend rather a capital gain
If the history on the free websites is correct, it looks like VGAD did not pay any distributions for 2 years, while VGS has made distributions every quarter?
ETFs have to pay out income as it is earned (unlike LICs). So when VGAD makes a big gain due to the AUD going up vs the USD they have to pay it out. Previous large distributions coincide with previous large jumps in the AUD. VGS, on the other hand, pays distributions on realised capital gains and dividends. The same is true of other hedged funds. VIF, Vanguard's hedged international fixed interest fund paid out 9% last year. VAF, Vanguard's Australian fixed interest fund, paid 3%. Total returns were about the same.
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