VistaShares

This address is how we stay in touch with the professionals who follow our work.

VistaShares delivers innovative Liquid Alternative investment solutions for today's investors. VistaShares ETFs are actively managed by industry and investment experts, offering a number of distinct strategies. Supercycle® Growth Equity ETFs seek exposure to technology-driven economic Supercycles® that the adviser believes may offer long-term growth potential. Target 15® option-income ETFs seek to generate monthly income while complementing a core equity portfolio. Income is not guaranteed and will vary, and the Target 15® name refers to the strategy's objective rather than a guaranteed or promised return. Investing involves risk, including possible loss of principal. There is no guarantee that any investment objective will be achieved, and past performance does not guarantee future results.

What a distribution rate is and is not

Income funds often quote a distribution rate. It is usually calculated by taking the most recent payment, scaling it up to a full year, and dividing by the fund's current price. Some funds quote a trailing version instead, summing the payments over the last year. Both are arithmetic about payments. Neither is a measure of what the fund earned.

A fund paying out a high rate while its price drifts down is handing back part of the money its holders put in. A fund paying a modest rate while its price climbs is doing something quite different. The two can quote very different rates and deliver similar total returns, or quote the same rate and deliver very different ones.

The rate also depends on the price on the day it is calculated, so it moves every day even when the payment does not. A falling price makes the same payment look larger. That is a property of the arithmetic, not news about the fund.

So the rate is more usefully read as a description of the payment schedule, and total return as the description of the result, and the two should never be confused for each other.

It is also worth checking which version of the rate is being quoted. A rate built from the latest monthly payment can move sharply if one payment is unusually large or small, while a trailing rate smooths that out but describes a year that has already passed.

None of this makes the rate useless. It is a fair description of what a fund is currently paying relative to its price. It simply answers a narrower question than the one most people are asking when they look at it.

Reading the notices that come with a payment

When a fund pays a distribution from anything other than its net investment income, it generally has to tell holders, in writing, what it estimates the payment was made of. These notices are published with the payment, often on the fund's own website, and they break the amount into income, short-term and long-term gains, and return of capital.

The estimates are exactly that. A fund does not know the final character of its payments until the year is over, when gains and losses for the whole year can be netted. The figure a holder reports comes from the tax form issued after year end, and it can differ noticeably from the monthly notices.

What the notices are good for is the pattern. A fund whose payments are estimated as mostly return of capital month after month is telling you something about the relationship between what it pays and what it earns. A fund whose estimates swing around is telling you that its income depends on gains it has to realise.

Neither pattern is a verdict on its own. Both are facts that belong in the conversation before a payment stream is built into anyone's plan.

The notices also show how a fund's own description of its strategy lines up with what its payments are made of. A fund that describes itself as income focused and pays mostly from realised gains is relying on market conditions in a way its description may not make obvious.

It also helps to keep the notices for a full year and read them together, rather than one at a time as they arrive. A single month says little. Twelve months side by side show the habit of the fund rather than the accident of one payment.

About this address

vsharesfund.com belongs to VistaShares and we use it for the email we send. Our main website is vistashares.com, and that is where our published information lives.

If a message from vsharesfund.com reached you and you want to confirm it came from us, write to info@vistashares.com or call (844) 875-2288.

What this address covers

Notes from this address cover how income is produced and paid out by funds: dividends, interest, option premium, realised gains, and the return of a holder's own capital. Each of these can arrive in a monthly payment looking exactly the same as the others, which is why the source matters more than the size.

The audience is advisers working out how a payment stream fits a client's plan, so the writing stays with the mechanics and the paperwork rather than any one fund.

The paperwork is where the useful answers are, and almost nobody reads it.