Synthetic and swap-based ETFs

Investing / Portfolios
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.

1 Like
84

For US investing, why not Invesco MSCI USA UCITS ETF (IE00B60SX170)? 0.05% TER, Swap based so without leaking 15% of dividend on taxes.

(though the swiss tax seems to be higher by more than the 15% difference based on ictax)

Chronicles of 2025
85

I have to check Swap based ETFs again; as of today I tought, there is a risk compared to physical replicated ETFs, but I cannot re-call it for now.

But yes, I will take another 0.02% lower TER :smiley:

86

The risk is that the counterparty goes bust and can‘t you the swap return. There is collateral posted though, that at minimum as high as the fund NAV.
So in that case you‘d be out of X days of return in case of default.
Negligible risk imo.

Swap fee has to bee accounted in the hidden costs as well though. Pretty low though.

87

It looked to me that there are no swap based ucits funds that also cover wht lost, including the fund you are referencing.

Specifically, the KID for this fund says the following:

Invesco MSCI USA UCITS ETF Acc zielt darauf ab, nach
Abzug von GebĂŒhren die Entwicklung der
Nettogesamtrenditedes MSCI USA Index abzubilden.

According to what I understand, this doesnt cover lost wht. Happy to be proven otherwise, as then, swap ETFs would be a very good alternative.

88

More appropriate for Synthetic and swap-based ETFs - #83 by Abs_max

but yeah there’s a reason those ETFs beat the index.

edit: https://www.invesco.com/ch/en/financial-products/etfs/invesco-msci-usa-ucits-etf-acc.html#Performance clearly visible in discrete performance that since 2018 (when the IRS rule changed) this beats the index by 0.3% consistently.

1 Like