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I'm trying to wrap my head around ETFs and am looking at various metrics to compare and trying to understand them, but I'm having some troubles to interpret them.

To understand the characteristics of a capitalizing vs a distributing ETF I'm comparing the Xtrackers DAX UCITS ETF 1C (LU0274211480) vs. its "sister", the Xtrackers DAX Income UCITS ETF 1D. After plotting the "Asset Under Management" (AUM) column from their data history tables, I noticed the following:

  1. there's a huge drop near the end of 2013 in the capitalizing ETF (blue)
  2. during 2014, the AUM merely changes
  3. from 2015 the AUM starts climbing again but stagnates towards 2016 and is slowly dropping ever since
  4. the capitalizing ETF is all over the place, while the distributing ETF seems to be relatively "calm" over the years

enter image description here

How can we interpret these observations? I'm especially curious about 1. since imho this should have impacted the NAV somehow, but apparently it did not. So does this mean there have been changes in other metrics as well (like liquidity or outstanding shares) that compensate this drop?

EDIT:

Add chart showing relative AUM development (values divded by first value of the series)

enter image description here

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    I would try to plot the last chart using different Y-scales - that may show you that the relative changes are not as big as they look with the same scale. Like the answers say, AUM is largely irrelevant - you want to compare returns - meaning relative changes in AUM, not the level itself.
    – D Stanley
    Jun 8, 2020 at 12:53
  • ah well, I could have thought of that myself. I added another chart with the relative changes. I think this and the creation/redemption mechanism makes it much clearer to me.
    – csch
    Jun 9, 2020 at 7:38

1 Answer 1

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NAV means NAV per share. A decrease in AUM as a result of decrease in total number of shares does not affect NAV per share.

Authorised Participants will ensure that Price per share is close to NAV per share using creation/redemption mechanism. https://www.etf.com/etf-education-center/etf-basics/what-is-the-creationredemption-mechanism

If you are a retail investor for these big names ETF, you can 100% ignore the AUM chart.

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  • That's very interesting and I did not know about that. So could this mean that in 2013 some AP decided to buy ETF shares from the market, return them to the fund and get back securities?
    – csch
    Jun 9, 2020 at 7:27

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