A great UBS World ETF?

#1

Hi all,

I came across this forum by chance after having read two books on investing and random research on the net. I think the people here seem to have a mindset that I like, which is why I’m breaking my rule of never asking for financial advice, especially not on the web :slight_smile:

Has anyone looked at this ETF from UBS:


It exists since Aug 2015.

It ticks off all the boxes that I’m looking for:

  • It invests in “the world” (large and mid caps anyway).
  • Low TER (0.21%).
  • Zero Entry/Exit charge, though there is a 3% “conversion fee” (not sure what it means).
  • More than 650M assets under management, so liquidity and bid/ask spreads should not be an issue.
  • Domiciled in Ireland and an UCITS label, so dividend withholding tax is kinda low (al explained in this other mustachian post) and I needn’t worry about how to trade and tax-declare it.
  • Base currency and hedged in CHF. I am Swiss, with a Swiss salary and planning to stay in CH indefinitely, So my understanding is that this means that with this I can follow the MSCI ACWI in the currency that matters to me in terms of income and expenses,
  • Done by UBS which I think means that I can buy arbitrary amounts at CHF 9 per transaction at Swissquote.

I’d be curious to hear what more experienced investors than me think and how people think it compares to Vanguard et al from a Swiss point of view.

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#2

Low TER (0.21%).

Vanguard’s VT is twice lower at 0.1% and mix-and-match from their regional ETFs is even cheaper

Domiciled in Ireland and an UCITS label, so dividend withholding tax is kinda low (al explained in this other mustachian post) and I needn’t worry about how to trade and tax-declare it.

No it means you get double taxed on half the dividends. But yeah you can just pay up more than you have to and not worry about it I guess, ignorance is bliss

  • Base currency and hedged in CHF.

3+% annual expense for hedging with dubious long-term benefit

Done by UBS which I think means that I can buy arbitrary amounts at CHF 9 per transaction at Swissquote.

Haha, good one. Even though transaction fee looks kind of ok, you forgot Stempelabgabe, #1 reason alone to forget about swiss brokers existence

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#3

Vanguard’s VT is twice lower at 0.1% and mix-and-match from their regional ETFs is even cheaper

…though I’d have to go with a broker outside of Europe for that, I think. The European version VWRL stands at 0.25% cost.

ignorance is bliss

As you write in the other post, this can be reclaimed but there is income tax on it no matter which way you go. There is a ~1yr delay of reinvesting that fraction of a percent, but I’d be fine with that.

3+% annual expense for hedging with dubious long-term benefit

Wow, is that what “conversion cost” means? I was thinking that it can’t be that because some articles say that hedging can add something in the ballpark of 0.1% to the cost. But indeed, overlaying this ETF with an unhedged USD one for the same index (SSAC) gives a 10% performance difference over the past 2.5 years, which is nowhere close to the USD/CHF currency fluctuation.

Stempelabgabe.

Seems to be 0.15% per transaction for foreign-domiciled funds, which is non-negligible but maybe not the decisive factor for someone with a buy-and-hold strategy who is looking for simplicity.

In summary, the 3% annual expense seems to be the real show stopper if it is really true. I’d be glad if someone could confirm that it is really the case.

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#4

Well, this ETF managed to return around 180% starting from mid. 2009 until Nov 2018 as per the fact sheet provided. This is shockingly appalling considering the return of MSCI ACWI in USD in the same period was around 250%

https://www.msci.com/documents/10199/8d97d244-4685-4200-a24c-3e2942e3adeb

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#5

Not unless you buy a US fund. With non US it’s a non reclaimable extra loss

Incorrect, almost all brokers in the world even swiss offer access to US stock markets

No, it’s just interest rate parity. Hedging ain’t free. Dollar currently yields 2+%, CHF yields -0.7%, who will pay the difference? You.

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#6

I think you’re making a big mistake here. It returned 180% in CHF, whereas the unhedged one returned 250% in USD.

If you have a look at the factsheets linked below, you will find that the hedged and unhedged versions of the index, both USD and CHF, generate roughly the same returns.

However, I can imagine that the index does not include the cost of hedging. Could it be?

Links:

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#7

I’m not seeing this big of a difference when I go to Justetf and look at returns in USD or CHF when looking at individual funds. The CHF/USD rate did not move that much in this period. Where is the mistake?

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#8

FYI that’s how the unhedged (SSAC) and hedged to CHF compare: https://www.tradingview.com/x/Y9Gcodv6/ (only a few years of data and I didn’t search too much for the unhedged version so that one has a 0.60% TER).

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#9

My understanding is that most European including Swiss brokers now offer only UCITS funds, and the US Vanguard ETFs are not in that class. E.g. even on vanguard.ch VT doesn’t show up. But it’s possible I’m missing something and VT can be bought using Swissquote etc.

I guess my biggest question is about this hedging business. Thanks to glina for posting that MSCI link. I think I assumed that in the “Annual Performance” table the “100% hedged” column is a lot closer to the “Local” column whereas Hedged is typically worse be 1-3%/year (2014 appears to be exceptional maybe because of the events in Jan 2015).

So now it appears to me that I should buy a “hedged in CHF” product only when I have reason to believe that the CHF will appreciate long term, which then really goes into crystal bowl reading for me…

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#10

Your understanding is wrong. Only EU customers of EU brokers are affected by this latest PRIIPS shit from Brussels. Some brokers (like degiro) overzealously try to enforce it also for swiss customers (non EU) even though they don’t really have to. Just vote with your money and don’t bank with such bonkers

Not sure about your factsheet, but looking at actual market price data for say SWDA vs IWDC I’m seeing a cost on average of 2.5% p.a. since 2014 and note the line stayed above 0% almost all the time - CHF hedging was almost all this time a positive cost:

And it makes sense, by construction it is a cost (cost of 1 month forwards ~= difference of yields) +/- fx rates change which were about flat.

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#11

My bad, indeed the exchange rate difference has not been so big. But what still stands is the fact that you can’t spot the difference over time between the hedged and unhedged versions in MSCI factsheets.

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#12

@dagobert I saw this post went very technical (or at least more that what I understand nowadays…).
Could you please summarize your conclusions and share what way you took. Thanks a lot :slight_smile:

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