FairShares patent-pending product makes markets more efficient by increasing the investment returns and buying power of income-producing securities. These outcomes are achieved by providing the systems, methods and software needed to remove the embedded dividends and accrued interest from the price of a security.
Securities are priced at their fair value.
Investors can purchase more securities with the same amount of capital.
Unnecessary taxes are negated.
Investment returns and yield increase.
Volatility is suppressed.
Why are the Values of Investment Funds Inflated?
The current payment system used to distribute income from securities to investors is antiquated and structured to only pay the last holders of record on a specific day. An unintended consequence of this “last holder of record” system is that investment managers do not know who they need to pay until the end of the payment period. Therefore, investment managers are forced to accrue dividends received from underlying holdings as assets of the investment fund, with no offsetting liability payable to recognize that these dividends do not belong to the fund. Rather, dividends belong to the fund’s investors and must be paid to them accordingly. This accounting treatment causes an investment fund’s net asset value to become inflated relative to the value of its underlying holdings. Consequently, a portion of the purchase price goes towards buying a dividend. A dividend is something that you never want to buy.
What Happens When Investors Buy a Dividend?
The act of buying a dividend lowers an investor’s total return. Buying an investment fund with a dividend included in its price means that 1) investors will buy fewer shares than they are entitled to because of the inflated investment fund price and 2) when the investment fund pays its next dividend, the money that was spent purchasing the dividend is returned to the investor, and then taxed. Therefore, investors are taxed on the return of their own capital. There is no economic benefit in buying a dividend. Investors should buy assets, not taxable liabilities.
Benefits of Removing Dividends from the Price of an Investment Fund with FairShares
FairShares Delivers Higher Returns
Investors achieve higher compound annual growth rates by avoiding unnecessary taxation, buying more shares and achieving a higher yield on invested capital.
World's Best Performing Index Funds
All things being equal, an index fund using FairShares technology will trade at a marked discount and greatly outperform any of its peers.
Investors Earn Income Daily
FairShares investors earn income for each day they own an investment fund and are entitled to receive their earned income even if they sell the fund prior to the ex-dividend day.
Investment funds that use FairShares technology will have a lower tracking error and reduced volatility which helps improve a manager’s risk-adjusted return metrics.
FairShares Difference Realized in 95 Days – Using Real Data*
More Money Made
Less Paid in Taxes
Higher Annual Yield
More Shares Purchased
* The analysis above was performed using real data ending 9-20-2019. The results demonstrate the performance and buying power difference realized when comparing a $15 Million purchase of SPY on 6-18-2019, a liquid S&P 500 index fund, with a $15 Million purchase of an identical FairShares S&P 500 fund, that has no dividend included in its price. After-tax dividends received on 7-31-2019 are reinvested in each security on that day and after-tax mark-to-market values of each investment are calculated based on the closing prices on 9-20-2019. The detailed math is available upon request.