Here’s an interesting lesson about picking ETFs which are big enough, and perhaps an ode to passive investing.
Vanguard closes its actively managed UCITS ETFs in Europe due to lack of inrerest. The affected tickers are: VDVA, VDMQ, VDMV, VDLQ.
Thank you, I will have to sell then. Is there any information straight from the horse’s mouth?
EDIT: Found it: https://global.vanguard.com/documents/vanguard-funds-plc-factor-etfs-shareholder-notification-final-correct-final-27-nov-2020.pdf
Is that so? I’ve never owned an ETF that shut down, but if you sell you’ll have to pay the usual fees for selling. If you don’t do anything it might be treated as a corporate action, and depending on your broker, that would be free?
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I have got no idea what DEGIRO is going to do in this case. It probably is their shared accounts which appear as registered shareholders and as such I haven’t been notified neither direcly nor yet. If so they could automatically sell it themselves or pay me the compulsory redemption from the fund later.
To save myself from headache I will just sell it before that eventuality comes to pass. The “Final Exchange Trading Date” seems to be 2021-02-23.
While closing some ETFs, Vanguard keeps improving/expanding its offer.
They just announced the launch of LifeStrategy UCITS ETF.
ETF of ETFs with various allocations between equities and bonds.
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The 80/20 acc version seems to me a good alternative (or additional product) to VT in terms of buy and hold. However, I wouldn’t say it’s cheap with 0.25% OCF.
True; and I‘m definitely happy to see that product in EUR. I believe it makes sense when having another potentially big position (beside VT) to have it in EUR.
The currency that a fund is traded in is irrelevant.
Foreign bonds need to be currency hedged to the currency you use to achieve the best risk adjusted return.
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…except, possibly, in transaction costs when buying. But the performance is determined by the fund’s holdings, not its trading currency.
To clarify: That’s a separate thing from the trading currency.
A fund can
- hold USD-denominated bonds
- be unhedged - yet still
- be quoted and traded in CHF on a Swiss Exchange
But its “value” and returns will be determined in USD - it’s just “translated” to CHF all the time, according to the current exchange rate.
Likewise, a fund could in principle
- hold USD-denominated bonds
- be hedged to CHF, thus largely “nullifying” the effects of USD/CHF exchange rate fluctuations (for CHF-base investors. The hedging will incur some costs)
- and still be quoted and traded in USD, that is paid and sold in USD on an exchange
Put differently, the hedging, if any, happens “inside” the fund, irrespective of the currency on “the price tag” that it is quoted and traded in (though the latter example is rather theoretical. If you buy a currency-hedged fund so as not to be subject to fluctuations of the USD exchange rate, you are are unlikely to do so in USD).
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Yes, all that matters is the currency of the bonds held in a fund.
A fund that holds 60% USD bonds and 40 Euro bonds should hedge 60% of it’s value USD/chf and 40% Euro/chf.
Guys I am very much surprised to see you not mentioning or investing in Invesco ETFs. These guys offer on S&P 500, MSCI USA and MSCI World the cheapest and best ETF in the market. The US exposure has a total fee of 0.05% AND this is the clue there is a 0% US Witholding Tax on the Dividends whereas with Vanguard you pay 15%. Maybe you should revisit your portfolios. Because currently you pay 6times the management fee on taxes!!!
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VTI has a 0.03% TER…
It is not about the fees but about the taxes. With Vanguard you pay after reclaim 15% Tax with the synthetic Invesco ETF 0% tax.
Do you mean that you pay no CH tax on the Invesco ETF at all?
Can we not split the threads, it’s already being discussed: Tax optimisation for ETF investing
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With a synthetic replication, you may face potential issue that you do not have with physical replication, counterparty risk is the biggest one.
Looking at the documentation of this fund:
https://etf.invesco.com/sites/default/files/documents/INVESCO_MARKETS_CH_EN_PROSPECTUS_1.pdf
- Using unfunded swaps. More info here https://www.justetf.com/uk/academy/synthetic-replication-of-etfs.html
- The index used is the S&P 500 Total Return (Net) Index, meaning the swap includes a US withholding tax in its payment formula. Page 226 of the Swiss prospectus:
In order to reduce the tracking difference, the return on the index provided for the purposes of
calculating the Swap may reflect a lower rate of withholding tax than ordinarily applied within the
Reference Index.
- Split between counterparties
Example VTI Vanguard
Dividends within the ETF: 100
Distribution paid to the investor: 100
US tax: 15
Net paid to investor: 85
Tax to be reclaimed in your DA-1: 15
Total dividends: 100
Investor taxed at 25% on his income in Switzerland.
100 * 25% = 25, but DA-1 amounting to 15. Remaining taxes due = 10.
Net in pocket = 100 -15 - 10 = 75
Payment from the swap: 85 (remember that the payment formula includes US tax but the exact amount is unknown)
Distribution paid to the investor: 85
IE tax (ETF based in IE): not applicable
Net paid to investor: : 85
Tax to be reclaimed in your DA-1: not applicable
Total dividends: 85
Investor taxed at 25% on his income in Switzerland.
85 * 25% = 21.25
Net in pocket = 85 - 21.25 = 63.75
Page 227
With respect to Class B Shares only and at the discretion of the Board of Directors, the Fund aims to pay quarterly dividends calculated by reference to the embedded reinvested dividends within the
Reference Index during the relevant dividend period less taxes or other withholding. The Reference
Index seeks to track the price performance of the companies contained within the Reference Index
and distributions made by those companies. There is no guarantee that any dividend will be paid. It
should be noted that the payment of any dividend will be calculated in a manner such that the
declared dividend will never be more than the excess performance of the total return performance of
the Fund as calculated by reference to the price return performance of the Reference Index, over the
relevant calculation period.
At the end, I agree that this ETF beats its benchmark. Due to the payment formula of the swaps ? probably.
I don’t feel comfortable with synthetic replication. It is a black box.
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Yep, there’s already that other thread about taxes. I started this just to make the closing of those few ETFs known. I guess the thread has served its purpose already.
Yes correct you do not pay any US Witholding tax and the counterparty risk is also with Physical ETFs that do security lending. With the Invesco ETF they hold physical securities and with the swap overlay they are Hire Act 871m compliant which means receive the gross return and therefore outperform the index by 0.6% or 60bps per annum. This is no Blackbox at all.
Do you know when they will be available on IB?
I can find the ones listed on bvme.
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