ETF distribution causes price drop

In by James PengelleyLeave a Comment

James Pengelley

Hi there,

I recently received a large dividend payout (~9%) from an etf that was unexpected (I’d invested for growth, not income and there was very little history of dividends being paid in this fund).

The day the fund went ex-div the unit price dropped by about 8%. I asked the fund provider (betashares) who mentioned that this is because on the ex-div date the unit price is traded minus the value of any dividends (as in the market prices in the value of dividends) though this surprises me for a fund that has no history of income payments.

Could it be that betashares release details of dividends to encourage investors to buy in at the last minute (or that they do so to artificially deflate the price for new investors)?

What are your thoughts?