Euro-denominated ETFs in European institution to balance USD-denominated ETFs in US institutions

Hi (and apologies for cross-posting)! I would greatly welcome advice and thoughts on an issue I have been analysing, and have a block on seeing clearly the best way forwards.

The context is that I am a US / UK dual-national residing in Spain for six years in the portfolio accumulation stage. I have been following a long-term buy-and-hold low-cost whole market index ETF portfolio, making maximum use of tax-advantaged 401k and IRA accounts as well a brokerage account with Schwab, Fidelity and TD Ameritrade. I have a simple target asset allocation which seeks to balance US and rest-of-the-world exposure, with a strong but reducing leaning towards equities as my wife and I have some rental and business income :

Bonds / US: 10%
Bonds / Global ex-US: 10%
Stocks / Global developed ex-US: 30%
Stocks / Emerg Markets: 10%
Stocks / US: 40%

We do not have plans to live in the USA and I have a concern about the risk of concentrating the overwhelming majority of our financial investment assets in USD-denominated funds in US-based financial institutions. This concern has been heightened by certain recent unexpected geopolitical events, specifically the Brexit referendum wiping off 20%of the value of our sterling assets, and also Trump being elected and then initiating trade wars. While it seems almost unthinkable that anything could happen which would radically reduce access to or the value of the holdings in these three huge US companies in particular, as things stand it would take one black swan event to jeopardise our retirement livelihood. And in the interim, it seems preferable to reduce the concern of this occurring, if only to sleep easy at night

My thought on reducing the risk in this area was to start to balance the USD / US holdings with Euro-denominated funds held by a European financial institution.

My research indicated that DEGIRO offers the lowest institutional costs, selecting their Custody account as I do not favour the lending of my ETFs to lower the fees. (I ruled out Interactive Brokers because while it has a European operation, its headquarters is in the USA. I also ruled out UK-institutions as we have no plans to live in the UK and do no seek to increase our GBP holdings)

For ETFs, I wanted to try to replicate the above asset allocation, with the requirements that the funds are (1) physical not synthetic, (2) EUR-denominated, (3) low-cost, (4) currency-hedged, (5) accumulating and (6) provided by a European institution. For my research, I used the justETF screener (

It was not possible to find exactly what I was looking for as there seem to be no ETFs which match all requirements and would give me the geographical coverage I am seeking, however my initial conclusion was the the following two ETFs offer the closest match:

iShares Global Aggregate Bond UCITS ETF EUR Hedged (Acc) (Ticker: A2H6ZT; ISIN: IE00BDBRDM35; fees: 0.10%)
Xtrackers MSCI AC World Index UCITS ETF 1C (Ticker: A1W8SB; ISIN: IE00BGHQ0G80; fees: 0.40%)

My requirements analysis is as follows:
Both funds are physical, accumulating and EUR-denominated
The iShares bond ETF has good global coverage, good fees (for Europe, a bit high compared to the USA) and is currency-hedged. On the other hand, the fund is new (November 2017) and Blackrock is a US company, albeit one with a huge presence globally.
The Xtrackers equity ETF has good global coverage and is provided by a European company. However there is no hedging, the costs are high compared to US-based alternatives, the fund is quite new (2014) and seems quite small (€254m). Lastly, I am not familiar with Xtrackers / Deutsche Asset Management’s reputation in the same way as I am with my other ETF providers.

So, context established, the specific areas where I would very much appreciate comments, suggestions and recommendations are as follows:

The merits / demerits of the risk analysis that is prompting me towards a non-US owned financial institution and EUR-denominated ETFs which will have somewhat higher fees than their US-owned alternatives.
The merits / demerits of Degiro as an institution and any non-US owned alternative institutions I may have missed or need to reconsider. (I have read up some recent critiques of Degiro and their responses, however it is difficult as a non-financial professional to reach a final conclusion on opposing arguments.
The merits / demerits of the two ETFs selected and any alternatives I may have missed or need to reconsider.

Many thanks in anticipation!

And so what does all this has to do with Switzerland?

The query isn’t specific to Switzerland, though it could relate to a US expat or another national residing there…or elsewhere.

This is a swiss specific forum, as a us you want boggleheads forum

That being said, currencies in equity funds don’t matter at all. You can buy S&P 500 in USD in US, and EUR CHF or GBP here in europe, it doesn’t matter, it’s the same thing modulo fund provider, some tax concerns and fees, European funds ate more expensive and probably you’ll get double or even triple taxed as a US, and will have a PFIC problem…

What matters a lot more is the underlying currency exposure of the companies in the index, where they do business and get paid. For example Philip Morris is an american company, quoted in USD on american exchanges but they have no US sales. They make all the money abroad and so negatively correlated with US dollar value. Or Nestle - only 1-2% revenues are swiss sourced, it’s laughably to think it has anything to do with representing the swiss economy. Half of S&P 500 revenues or so are foreign so its a quite diverse and good index actually, dont’ underestimate it

Hedged stock funds make therefore little sense. They hedge only currency in the stock prices, but that’s not the most important variable. Besides it’s crazy expensive these days, 3% per year and rising

For bonds though hedging might make sense. Currency is directly related to return, and fx volatility is usually higher than bond yields. But hedging US governement bonds for EUR will mean for example you’ll yield about the same as european EUR government bonds, i.e. about zero or negative

1 Like

hedgehog - thanks for these clarifications; they are very useful.

Do you think a Global Inflation Linked bond ETF makes sense for a Swiss investor?

It’s an interesting and correlation-wise quite distinct asset class on its own sitting somewhere between gold and bonds

Personally I don’t buy any bonds however as it is I’m way overweight on them with pillar 1 and 2 forced down my throat