The PALL ETF holds physical palladium bars in JPMorgan vaults in London and Zurich. Here is how the structure works, what you actually own, and where it can break.
Contents5 sections
Most investors who buy PALL never read the prospectus. That is a mistake. PALL is one of the few commodity ETFs where the structure genuinely matters because the underlying market has occasional dislocations that show up in tracking error and creation-redemption activity.
The structural basics
PALL is a grantor trust, not a 1940-Act fund. Each share represents a fractional ownership claim on a specific allocated pile of palladium bars sitting in vaults. JPMorgan acts as custodian. Bars are LBMA Good Delivery, weighed and bar-listed quarterly with serial numbers published.
- Issuer: abrdn (formerly Aberdeen Standard)
- Custodian: JPMorgan Chase Bank, N.A. - London branch
- Vault locations: London and Zurich
- Expense ratio: 0.60% annually
- Bar size: typically 1.5-7kg ingots
How creation and redemption work
Authorized participants (large broker-dealers) can create or redeem PALL shares only in physical metal, not cash. They deliver palladium bars to the custodian to create new shares, or they take delivery of bars to redeem shares. This is what keeps the ETF price tied to spot.
"The grantor trust structure means every share is backed by metal you can theoretically point to. The flip side is that liquidity depends on a tiny club of APs willing to move physical bars." - SS&C custodian whitepaper
Where the structure can strain
In March 2020 and again in March 2022, physical palladium liquidity dried up as London-Zurich shipments faced flight cancellations and lease rates spiked. PALL traded at premiums of 1-3% to NAV during those windows because APs could not source bars cheaply enough to arbitrage the spread.
Tax treatment matters
For US investors, PALL is taxed as a collectible at 28% maximum long-term rate, not as a security at 20%. This is identical to GLD and SLV. The trust issues a Schedule K-3 each year, and the metal is sold periodically to pay expenses, generating small reportable gains even if you never sell shares.
When to use PALL versus alternatives
PALL is appropriate for tactical exposure or long-term holdings under $250,000. Above that, allocated vault accounts at Brinks or Loomis become cost-competitive and free you from the 28% collectibles rate if structured correctly. Futures (PA on NYMEX) are cheaper for short-term traders.
Bottom line: PALL is a clean way to own palladium with real bars behind every share, but the collectibles tax treatment and the 60 basis points of expenses mean it is not a free lunch. Read the bar list once a year and you will understand what you actually hold.
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