Shy away from USD ETFs because the dollar is currently so high?

[freewheeler]

Think I can reason the answer to this but would appreciate confirmation:

If I want to invest in some Emerging Markets ETF that's only available in USD (such as EXMC "Lyxor MSCI Emerging Markets Ex China UCITS ETF - Acc") then, ignoring the currency conversion cost imposed by my SIPP platform (Interactive Investor), does it matter that this isn't traded in my home currency (GBP)? I'm thinking the answer is no, because once I've exchanged my currently cheap pounds for expensive dollars, those dollars will buy the same amount of EM equity (that the ETF is composed of) as could have been purchased with the original GBP sum. And the same will apply when it comes time to sell (however the two currencies have moved in the meantime). Have I got this right?

I'd prefer to stick to ETFs traded in GBP but there seems to be a much wider choice in USD.

[Pendrainllwyn]

Correct. It’s the currency of the underlying assets that’s important. Another consideration is what currency the ETF will pay dividends in. The USD ETF will probably pay in USD which may not suit.

Pendrainllwyn

[Neutrino]

You can find ETFs here:
https://www.justetf.com/uk/
For example, ISHARES VII PLC MSCI EM EX CHINA UCITS ETF USD ACC (EXCS) is traded in GBP on the LSE.
This is not a recommendation. DYOR

[freewheeler]

Correct. It’s the currency of the underlying assets that’s important.

Great. Thanks for confirming.

Another consideration is what currency the ETF will pay dividends in. The USD ETF will probably pay in USD which may not suit.

Noted. That would increase my preference for 'accumulating' ETFs.

You can find ETFs here:
https://www.justetf.com/uk/
For example, ISHARES VII PLC MSCI EM EX CHINA UCITS ETF USD ACC (EXCS) is traded in GBP on the LSE.

Useful, thanks. EXCS is interesting but with a TER of 0.25% it can't match EXMC's 0.15%. (This is the thing. Not only do US listed ETFs offer greater variety but they also tend to have lower TER.) Given that this would be 'long term buy & hold' I guess that small difference in TER trumps the currency exchange costs.

[GeoffF100]

Useful, thanks. EXCS is interesting but with a TER of 0.25% it can't match EXMC's 0.15%. (This is the thing. Not only do US listed ETFs offer greater variety but they also tend to have lower TER.) Given that this would be 'long term buy & hold' I guess that small difference in TER trumps the currency exchange costs.

You are not allowed to buy US domiciled ETFs unless they have a KIID, which none of them do. The Lyxor fund is probably domiciled in Luxembourg and probably has a KIID. You need to check up about the double taxation treaties though:

https://monevator.com/lyxor-core-etfs-v ... -wrinkles/

[1nvest]

You are not allowed to buy US domiciled ETFs unless they have a KIID, which none of them do. The Lyxor fund is probably domiciled in Luxembourg and probably has a KIID. You need to check up about the double taxation treaties though:

If you open a brokerage with the likes of Firstrade, a US brokerage, and register a W-8BEN ...etc. I believe you can still buy US ETF/mutuals/funds where no KIID exists. Capital gains (and dividends/interest) from funds will be taxed as income by HMRC, however on dividends/interest the US will deduct 15% withholding tax anyway and you can offset that against UK tax. Most/some banks will permit you to open a US$ based account, mine is with Barclays, to/from which you can transfer funds from/to the brokerage account.

I used to hold CHY, a convertible based US fund i.e. bonds with share convertibility options. It diversifies widely across many such preferred holdings so reduces the risk of defaults from single holdings. Pays around 10%/year in dividends, in regular monthly amounts. I sold out of that as part of PRIIP regulations that insisted on foreign funds having a KIID that the UK still maintained those rules despite leaving the EU. Even with 20% taxation on a 10% dividend yield, 8% net, CHY still has appeal and I am looking to buy back in again. Has high fees etc, but for a regular income, ignore the capital value fluctuations that broadly tend to remain flat, and it has its uses. No EU/UK safeguards of course, you instead fall under US safeguards, which are good anyway. The share price does zigzag around so adding low/reducing high can further enhance rewards.

One risk is that if you die with more than $60,000 of US assets you fall into US Estate tax rules, however UK/US tax treaty has UK citizens having the same generous allowances so north of $10M before any tax falls due, but for that exemption your heirs do have to file the correct paperwork within the correct timescales or otherwise end up being caught for taxes. There are UK specialist solicitors who deal with such matters, so a note/pointer attached to your Will is a good idea.

[freewheeler]

You are not allowed to buy US domiciled ETFs unless they have a KIID, which none of them do. The Lyxor fund is probably domiciled in Luxembourg and probably has a KIID.

I did not know that. So the universe of US denominated ETFs that I can hold may not be as big as I thought.
Having checked, the Lyxor EMXC ETF is indeed domiciled in Luxembourg and does have a KIID.

You need to check up about the double taxation treaties though

Do you happen to know if I still need to check such things if investing within ISA or SIPP? I'd like to think that my ISA/SIPP platform simply wouldn't let me trade in anything that had peculiar tax liabilities, but who knows. Or can I assume that anything presented on https://www.justetf.com/uk/ is free of such concerns?

[Lootman]

I'd like to think that my ISA/SIPP platform simply wouldn't let me trade in anything that had peculiar tax liabilities, but who knows?

I'd like to think so too. And no doubt there are a set of rules somewhere for what you can and cannot trade in an ISA. But in practice it comes down to whether your ISA provider lets you buy a particular security or not. And that may vary by provider, since they are probably not all equally diligent and accurate in preparing their list of eligible or ineligible securities. So in my experience it is a matter of trying it out and seeing what happens.

For example last year I tried to buy a Jersey based investment company and that was declined. But they let me buy a US-listed fund that should have been ineligible.

There is also the possibility that an issue might have been eligible at the time you bought it, but later ceases to be so. This also happened to me with a security that de-listed and became private. In that case they wrote and told me to either sell it or transfer it out of the ISA - I did the former as I did not want to lose its tax-sheltered value. So if you hold an ineligible security the provider will still let you sell it even though you could not buy it.

So the message seems to be: Suck it and see.

[GeoffF100]

Do you happen to know if I still need to check such things if investing within ISA or SIPP?

Yes. ISAs are free of UK taxes and SIPPs are free of UK taxes within the fund. Withholding taxes are taxes charged on your dividends by foreign countries. It is often possible to claim some of that tax back if the double taxation treaty allows that. The best case for retail investors is UK or Ireland based ETFs. US based ETFs can have advantageous tax treatment in a SIPP, but the FCA insists on a KIID for retail investors. Some EU countries have interpreted the EU directive more liberally.