why does EDV almost always have premium to NAV?

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cabronjames

why does EDV almost always have premium to NAV?

Post by cabronjames » Wed Jun 22, 2011 5:18 pm

for my BOND allocation, I use MediumTex's "synthetic TLT", 50% EDV, 50% VUSTX.  I use Vanguard VBS as the custodian for my PP fund.  Hence I have an interest in EDV.

I randomly noticed that it appears that EDV almost always trades at a premium to the NAV, most often in the 0.50%-0.75% premium, but at times even over 1.00% premium.  During 2010, only 2.4% of the time it was at a discount, & during 2011Q1 only 1.6% of the time is was at a discount. Vanguard EDV page link https://personal.vanguard.com/us/funds/ ... st=tab%3A1 , scroll to the bottom of page for section "ETF premium/discount analysis".

To contrast, I looked at iShares' TLT http://tools.ishares.wallst.com/ishares ... ter=1-2011 .  iShares presents the premium/discount info a little differently, but it seems that TLT is at a discount almost as often is at is at a premium to NAV.  In 2011Q1, 33 of 82 days (40% of days) TLT was at a discount.

Also, using the common 2011Q1 time window, TLT was outside of the "regular" -0.50% to 0.50% of the NAV rarely, only 2.4% of days.  In contrast, EDV had a premium of greater than 0.50% on 37% of the days.

Why is EDV usually at a premium to NAV?

By chance is what is occurring with EDV a milder case of what happens to standard sovereign 1 oz gold coins, which I've read here "always" have a "premium" of say 3% over "spot market gold price"?

Thx in advance for your insights!
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Re: why does EDV almost always have premium to NAV?

Post by MediumTex » Wed Jun 22, 2011 5:21 pm

I'm sure it has something to do with low volume and large bid/ask spreads.

For a long term holder, this shouldn't matter much, especially if the premium to NAV is relatively stable.
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