Best ETF hedged in ibkr

Investing / Portfolios
1

Hi,

I’ve read a lot of threads , but still not clear for me what is the best etf in ibkr hedged chf

Do we have somewhere a wiki like :slight_smile:
Best etf world in usd : VT why bla bla
Best etf world in chf and why
Best etf world chf hedged and why
Best etf world hedged eur and why

2

Hedging stocks to currencies doesn’t make much sense:

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3

A bond ETF probably.

4
  • Probably VT or VWRL.
  • For me, an ETF in CHF (not hedged) does not make sense since a) you can buy the ETF specifically in CHF but with lower volume and higher spreads at SIX and b) the underlying is in USD/EUR/… anyways.
  • Not interesting for me, therefore, I leave that open. But I would take an all-world ETF from Vanguard or Blackrock’s iShares.
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5

ETFs traded in CHF do make sense for people who (need to) use a broker with high currency exchange fees such as Swissquote. For IBKR clients, there is almost no benefit.

IWDC is very expensive (0.55% TER). I’m not interested in CHF-hedged stock ETFs myself but if I was, I would likely choose the UBS MSCI ACWI SF UCITS ETF (hedged to CHF) with a 0.21% TER.

What’s that supposed to be?

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6

If you are looking for an all world equity ETF hedged in CHF then most like IWDC is your best bet. It comes at a cost though because it’s TER is higher than SWDA (unhedged version)

IWDC is tracking MSCI World. There is also a very new ETF from UBS IE000N6LBS91(also tracking MSCI world) but it’s very small for now.

I am assuming you are looking for hedged version to have reduced currency exposure and not necessarily higher returns. If objective is to have higher returns then there is no conclusive proof if hedging works or not for Equity in long term investment.

Note -: MSCI World Index tracks developed world. It doesn’t include Emerging markets

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7

There is also ACWIS from UBS. Msci acwi hedged to chf, high aum.

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8

I think that’s synthetic swap based ETF. Right? Or is it also physical replication ?

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Good point mentioning that it’s swap-based. However, I assume the currency hedge anyway has a counter party risk, so maybe for a hedged ETF the difference between physical replication and synthetic is less significant? I’m not sure.

10

Hi there

So far I invested only in VWRL on IBKR and (as I just opened a new account on Yuh) I am now interested in investing in IWDC (as one can trade IWDC for free in Yuh). The reason is to reduce some risks (Yuh + iShare vs IBKR + Vanguard and different bank/broker).

So IWDC is hedged. Can someone point me to an explanation of what hedged exactly means resp. what the involved risks are?

Thanks.

11

First of all , it’s good to do research and not just invest in the ETF because it’s cheaper to buy. So I think you are doing good to ask :slight_smile:

IWDC is hedged for currency. There are some posts on forum about this topic. One of them is Here

Normally when you invest internationally, you carry two risks

  1. Risk of investment in the underlying asset. Let’s say Apple stock. Stock going up means you will be rewarded. And you will lose money if stock goes down.
  2. Risk of currency devaluation. In our example it would be CHF / USD.

Hedged ETFs try to reduce #2 by constantly hedging the currency exposure.

However be aware of some things

  • currency hedged ETFs have higher TER vs standard. IWDC (TER 0.55%) is currency hedged and SWDA (TER 0.20%) is not. They are both from ishares for MSCI World exposure.
  • Hedging involves costs
  • based on historical research, there is no conclusive evidence if hedging for currency for Equity exposure works in advantage or not.Read this

By the way, if your objective is to diversify broker and fund, you can also think of buying VWRL on YUH and buying other ETF on IBKR. IBKR has more choice. You can buy ACWI, IWDC, and many more.

Last point -: be aware that MSCI world ETF doesn’t include exposure to emerging markets. MSCI ACWI ETFs have similar exposure like VWRL. Read this Post

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12

Just be aware that this is only the case during buying. Once you sell at Yuh you will pay the standard fees of Yuh, which are way higher than IBKR.

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13

Also keep in mind that global companies have revenue in many currencies, not just in the nominal currency of the company’s stock listing. The currency hedging applied by hedging ETFs is always based on the latter, as far as I know, so may be far off from an optimal currency hedging setup.

An extreme example would be Nestlé being listed in CHF while only having a tiny CHF revenue. CHF-hedged world ETFs do not apply any hedging to Nestlé’s position.

If you still want to invest in a CHF-hedged world ETF, I’d consider UBS ETF (IE) MSCI World UCITS ETF (hedged to CHF) with a much lower TER of 0.13% p.a. compared to IWDC’s 0.55%. Assuming you want to invest long-term, don’t ignore much higher recurring fees because of lower one-time fees.

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