Aberdeen UK Tracker fell just 0.3% short of matching the performance of the FTSE All-Share Index over the course of 2015. Most of that is accounted for by the fees on the fund which, although reduced last year, still act as a drag on returns.
The Board, as advised by the Investment Manager, took the decision to equitise the Company’s dividend receipts through the use of FTSE 100 and FTSE 250 futures contracts with effect from 1 July 2015. This change should enable the portfolio total returns to better match those of the Index.
When calculating total return, the methodology used by the Index differs from that of the Company as the Company’s declared dividends are treated as being reinvested on the interim and final dividend ‘ex’ dividend dates in April and August, whereas the Index calculates total return by reinvesting underlying Index constituent’s dividends on each of their respective ‘ex’ dividend dates.
Although the Company’s capital return has regularly matched the Index, this change should negate much of the potential tracking error the Company faces in rising markets in terms of total return under this calculation methodology. In falling markets this small additional exposure to the market could have a negative effect. This will not affect ongoing charges.
They say, over the long term UK equity markets have tended to rise, thus the use of FTSE futures contracts should enhance the Company’s total returns over the longer term.
AUKT : Aberdeen UK Tracker to get better at reinvesting dividends