The Vanguard Australian Shares Index ETF (ASX: VAS) is an exchange-traded fund (ETF) that seeks to give investors exposure to the S&P/ASX 300 Index (ASX: XKO), being 300 of the biggest businesses on the ASX.
It has been a difficult start to the week, with the VAS ETF down by 1.6% on Monday.
There are two different things that are likely affecting the fund.
The movement of the VAS ETF unit price is largely dictated by the share price changes in the underlying businesses. We're talking about names like Commonwealth Bank of Australia (ASX: CBA), BHP Group Ltd (ASX: BHP) and CSL Ltd (ASX: CSL).
Since 15 September 2023, the ASX 300 has fallen by more than 3%, with investors seemingly worried about the US Federal Reserve committing to keeping interest rates higher for longer than what some investors were expecting and possibly hike again. The ASX 300 is in the red today as well.
Why do interest rates matter to valuations? As Warren Buffett once said:
The value of every business, the value of a farm, the value of an apartment house, the value of any economic asset, is 100% sensitive to interest rates because all you are doing in investing is transferring some money to somebody now in exchange for what you expect the stream of money to be, to come in over a period of time, and the higher interest rates are the less that present value is going to be. So every business by its nature…its intrinsic valuation is 100% sensitive to interest rates.
Vanguard Australian Shares Index ETF (VAS) goes ex-distribution
The ex-distribution date tells us when investors will miss out on the income payment.
Today is the ex-distribution date, so investors won't be entitled to the upcoming $1.288 per unit quarterly payout if they buy VAS ETF units today.
The distribution equates to a distribution yield of 1.46% based on the Vanguard Australian Shares Index ETF unit price on Friday, which would explain the majority of the decline.
ETFs pass through the dividend payments they receive up to investors, so this payment represents the latest dividends that it has received in the last few months.
It's expected to be paid on 17 October 2023, which is only a couple of weeks away.