Synthetic and swap-based ETFs

Investing / Portfolios
81

I‘d say it would start to be worth it for an 0.3 TER (depends on their indirect trading costs).

You also have an assured way to circumvent withholding tax, for example for people having mortgages, that otherwise could not get them back with da-1. That alone can make sense for some. Probably similar than swap etfs, but potentially a slight edge.
Although there are talks to prevent swap etfs in the future circumventing the wht. With this it would always be possible.

I think it‘s another tool in the arsenal, to be deployed in specific circumstances.

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82

I was looking at Synthetic S&P 500 ETFs and I saw that the distributing synthetic ETFs have widely differing dividends:

ranging from 0.86% to 1.67% for the reported 1 year dividend yield, without a clear associate tacking error. This of course piqued my interest given the tax on dividends but not capital gains in Switzerland and I started looking what ICTax thinks of this.

If I zoom in on the " Amundi S&P 500 II UCITS ETF EUR Dist", I get that

(a) ICTax just takes the distribution, not the dividend of the underlying index for 2023.
(b) for 2022 and earlier the fund actually had a higher dividend yield, but significant parts of it were non-taxable according to ICTax, e.g. ICTax - Income & Capital Taxes

So this seems actually like it might be a decent way to reduce taxation on a signficiant part of a typical world portfolio?

So questions here:

  1. What determines the distribution of a synthetic ETF?
  2. How do parts get classified as non-taxed distributions here?
  3. Does this actually make for a decent alternative to VOO (given that tax benefits seem higher than the extra cost drag I measured the last 1/3/5Y) or are there concerns I might be missing?*

Any insights would be appreciated.

*: Main one I’m aware of is that Amundi has been changing indices on and merging funds that means they could be a bit of a less reliable partner in this.

83

I would say you should simply compare the performance of this ETF vs. VUSA (which is UCITS physical ) and that would give clear idea of the overall performance after considering everything (dividends , tracking error etc)

As per JUSTETF the performance (dividend reinvested) pre tax is higher vs VUSA.

I would recommend also to compare the taxation on VUSA vs Amundi to understand if post tax performance is also superior or NOT. Most likely it would be.

Regarding taxation, it all depends on what exactly they are doing to execute their swaps. Article gives some insights.

Of course Swap based ETF is not really the same as physical. But you already know that.

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