I was reading up on the Lion-OCBC Hang Sang Tech ETF and noted that no dividends will be paid to preserve the fund’s NAV. Is this to the benefit of the ETF managers, or investors like us?

Hi Renice,

By retaining the dividends within the ETF, the fund is able to increase its investable assets. For an ETF that pays out dividends typically through fixed income assets, the dividend rate is guaranteed and that can be parsed on to the fund subscribers easily as the coupon rate is factored into the fund structure.

If you refer to Tech companies today, most of them are mostly growth oriented and not all of the companies within the fund might disburse dividends to their shareholders. The tech ETF was not designed to disburse dividends, as it's structure is mostly equity based.

The move to not disburse dividends, in actuality is to benefit the fund investors such as yourself. The NAV, will rise naturally if any dividends are retained within the fund, and will grow sustainably with the increased growth of the underlying companies. The whole point of investing into such funds, is to enable growth of your invested capital. As the NAV grows, your invested funds grow in tandem as well. However, if they are constantly paying out dividends, the growth of the NAV will be affected due to constant annual outflow from the funds.

I do hope i was able to address your queries accurately!

*The above information does not constitute of investment advice. Please do your own due diligence before committing to any investment decision.