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Today this ETF went Ex -Div: HSBC FTSE 100 ETF HUKX.L

It dropped by the amount of the FTSE decline (tracking), plus it's own ex-div amount.

So far, so good.

However - The instrument is designed to track the FTSE 100 - the underlying instrument (FTSE 100) is adjusted for dividends at other times, and loses value on some Thursdays when it's it's constituents go Ex div themselves.

So doesn't the ETF suffer the effect of ex-div twice - Both when itself goes ex-div, and when the underlying index it's tracking loses value due to ex-div activity?

How does the ETF value catch back up with the FTSE value to track it?

Is this because we trust the fund manager to reinvest the dividends they receive into the fund from the underlying investments?

Is the fund manager obligated to reinvest the dividends received immediately?

For timing purposes, shouldn't there be some instances where the ETF value is greater than FTSE 100, because some dividends of underlying stocks have been collected and reinvested, but the ETF itself hasn't disbursed them?

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  • What you're asking isn't very clear, particularly the statement about suffering the effect of ex-div twice. I don't have access to the data so it's impossible to make a comparison and see the specifics of what you are taking about. One thing that you should be aware of is that a dividend doesn't change the value of an ETF. Its share price drops by the amount of the dividend(s) but no value is lost since it will recoup that amount on the Pay Date. If you obtain data for the index and the ETF, you should be able to figure out what is happening to price on the ex-div dates. Jan 29 at 2:20
  • When the ETF ex-div, it falls by amount of dividend, but the underlying index does not. This causes a discrepancy between the price of the ETF and the underlying index. Over the long term, this discrepancy must compound so is a tracking error to the value of all the ETF dividends paid (which the underlying index has not paid.) When shares of the underlying index go ex-div, causes the value of the index to fall. The ETF tracks this fall, as it's tracking the index. So the ETF falls on it's own ex-div date, and in respect of tracking the falls of the FTSE when the FTSE constituents go ex-div.
    – Cheetara
    Jan 30 at 14:03

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