Euro government bond ETFs vs cash, accumulating REIT ETFs?

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finvestor
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Euro government bond ETFs vs cash, accumulating REIT ETFs?

Post by finvestor » Thu Apr 20, 2017 1:51 pm

Hello,

I'm building a long-term buy&hold portfolio of approx. 300k€. My home currency is €, and I live in a country where accumulating ETFs are the best option to minimize tax drag. In terms of asset allocation, I'm aiming for 70% stocks and 30% bonds, and am planning to rebalance regularly. I think I have decided the contents (ETFs) of the stock part: mostly iShares MSCI World (EUNL), and some developing markets as well as some small cap value. All of these are accumulating ETFs rather than distributing due to tax efficiency.

The problem is the bond part: In principle I would like to just pick a low cost Euro govt bond ETF (there seems to be an accumulating one from DB X-Trackers with a low enough TER), but the yields of those are currently close to zero. Thus, I'm having hard time trying to figure out if it makes sense to take interest rate risk if the expected reward for taking that risk is close to zero, or if it would
be better to just stick with 30% cash for now, and move to bonds if/when the interest rates would get a bit higher. Any advice or opinions on this issue would be appreciated :)

The second point I'm contemplating is if I should include a REIT ETF as a part of my stock portfolio (maybe 10-15%). There, the main issue is that I could not really find any accumulating REIT ETFs. If you know of any, it would be great if you could let me know as well! :)

Thanks in advance!

Valuethinker
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Re: Euro government bond ETFs vs cash, accumulating REIT ETFs?

Post by Valuethinker » Thu Apr 20, 2017 4:13 pm

finvestor wrote:Hello,

I'm building a long-term buy&hold portfolio of approx. 300k€. My home currency is €, and I live in a country where accumulating ETFs are the best option to minimize tax drag. In terms of asset allocation, I'm aiming for 70% stocks and 30% bonds, and am planning to rebalance regularly. I think I have decided the contents (ETFs) of the stock part: mostly iShares MSCI World (EUNL), and some developing markets as well as some small cap value. All of these are accumulating ETFs rather than distributing due to tax efficiency.

The problem is the bond part: In principle I would like to just pick a low cost Euro govt bond ETF (there seems to be an accumulating one from DB X-Trackers with a low enough TER), but the yields of those are currently close to zero. Thus, I'm having hard time trying to figure out if it makes sense to take interest rate risk if the expected reward for taking that risk is close to zero, or if it would
be better to just stick with 30% cash for now, and move to bonds if/when the interest rates would get a bit higher. Any advice or opinions on this issue would be appreciated :)

The second point I'm contemplating is if I should include a REIT ETF as a part of my stock portfolio (maybe 10-15%). There, the main issue is that I could not really find any accumulating REIT ETFs. If you know of any, it would be great if you could let me know as well! :)

Thanks in advance!
In truth I wouldn't bother with REITs. A global equity index fund would already hold REITs, and there are very few countries that use the REIT structure. You wind up with a lot in USA, bit in Japan, Hong Kong, Australia, UK etc.

I hold a short term government bond ETF (sterling GBP) but Euros the interest rates are even lower. Zero interest rate in your bank account is probably all you can do. However banks are not risk free in the Eurozone-- stay within the 100k EU insurance limit per bank. If I lived in Greece, I wouldn't hold much money in Greek banks. On a similar basis one would therefore wish to be wary of Portugal, and I am really not sure what to do about Italy.

Note that some countries Euro bank accounts now pay a negative interest rate, I believe.

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Re: Euro government bond ETFs vs cash, accumulating REIT ETFs?

Post by Tyler Aspect » Thu Apr 20, 2017 9:52 pm

How about "iShares Core € Corp Bond UCITS ETF"? Its yield is around 3%, with a duration of 5.3 years. This is a corporate bond ETF, not government bond though.
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Re: Euro government bond ETFs vs cash, accumulating REIT ETFs?

Post by imperia » Fri Apr 21, 2017 1:59 am

db x-trackers FTSE EPRA/NAREIT Developed Europe Real Estate UCITS ETF DR - 1C (D5BK)-ACC
Amundi Index FTSE EPRA NAREIT Global - UCITS ETF DR (EPRA)-ACC

finvestor
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Re: Euro government bond ETFs vs cash, accumulating REIT ETFs?

Post by finvestor » Fri Apr 21, 2017 5:22 am

Thank you for your replies!

Indeed I have somehow missed the REIT ETFs suggested by imperia. The Amundi one seems to be particularly suitable, the only problem is that it seems to be listed only in Paris, which is a bit tricky for me... The X-trackers one I could buy easily, but focusing on Europe alone is of course not ideal for diversification. But the fact that it is accumulating is of course very nice.

Valuethinker: The reason I would like to include some REITs in my portfolio is that I remember seeing some studies which show that historically one has obtained a better risk-adjusted return by doing so. Past performance is of course not as such an indication of future returns, but...

Tyler Aspect: The iShares Core Corp Bond ETF you suggest seems to be distributing, and thus not ideal for me. Moreover, correct me if I'm wrong, but my impression is that corporate bonds (unlike government bonds) contain some equity-like risk, and thus would not be ideal to form the "safe" component of the portfolio, as they may suffer during stock market downturns.

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Re: Euro government bond ETFs vs cash, accumulating REIT ETFs?

Post by Fabio » Fri Apr 21, 2017 10:47 am

finvestor wrote:Indeed I have somehow missed the REIT ETFs suggested by imperia. The Amundi one seems to be particularly suitable, the only problem is that it seems to be listed only in Paris, which is a bit tricky for me...
It's quite new, it was listed just a few days ago on the italian exchange so I guess it's a matter of time before it will be listed on other european exchanges as well. On the Amundi web site you can find the list of countries where it is authorized: Spain, Netherlands, Finland, Sweden, Germany, France, Luxemburg, UK, Austria, Italy, Ireland, Belgium, Switzerland.

For the bond fund have you considered the db x-trackers Global Government Bond ETF (DR) 1C (EUR hedged)? It follows the Citi World Government Bond Index Developed Markets, so you would have a broad exposure to government bonds.

There is even a broader bond fund, the AMUNDI INDEX BARCLAYS GLOBAL AGG 500M ETF (also a new ETF) which follows the Bloomberg Barclays Global Aggregate (500 Million) total return index, that is global investment grade debt, developed and emerging, unhedged.

* edited to correct typos
Last edited by Fabio on Fri Apr 21, 2017 11:26 am, edited 1 time in total.

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Re: Euro government bond ETFs vs cash, accumulating REIT ETFs?

Post by Tyler Aspect » Fri Apr 21, 2017 11:17 am

iShares Core MSCI World UCITS ETF USD (Acc)

I think it is traded as "EUNL" in the Euro currency. This is a world-wide corporate bond ETF.

(incorrect information removed)
Last edited by Tyler Aspect on Fri Apr 21, 2017 12:03 pm, edited 1 time in total.
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Re: Euro government bond ETFs vs cash, accumulating REIT ETFs?

Post by imperia » Fri Apr 21, 2017 11:37 am

IWDA is listed as EUNL in Germany(Xetra), and it is not bond ETF.

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Re: Euro government bond ETFs vs cash, accumulating REIT ETFs?

Post by Valuethinker » Fri Apr 21, 2017 11:40 am

finvestor wrote:
Valuethinker: The reason I would like to include some REITs in my portfolio is that I remember seeing some studies which show that historically one has obtained a better risk-adjusted return by doing so. Past performance is of course not as such an indication of future returns, but...
viewtopic.php?f=1&t=213792&newpost=3337281&start=50

more discussion. In the long run you may be right. In the interests of simplicity I wouldn't chase it, though.
Tyler Aspect: The iShares Core Corp Bond ETF you suggest seems to be distributing, and thus not ideal for me. Moreover, correct me if I'm wrong, but my impression is that corporate bonds (unlike government bonds) contain some equity-like risk, and thus would not be ideal to form the "safe" component of the portfolio, as they may suffer during stock market downturns.
Yes, even investment grade corporate bonds suffer from equity risk. Look at some of the corporate bond funds 2008-09, how far they dropped relative to safe government bonds.

Problem in Eurozone with government bonds is that the safe ones have even negative yields. You will actually lose money investing in them (in nominal terms, if inflation is low enough, you will make money in real terms).

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Re: Euro government bond ETFs vs cash, accumulating REIT ETFs?

Post by finvestor » Sat Apr 22, 2017 3:29 pm

Fabio wrote: For the bond fund have you considered the db x-trackers Global Government Bond ETF (DR) 1C (EUR hedged)? It follows the Citi World Government Bond Index Developed Markets, so you would have a broad exposure to government bonds.
That's an interesting ETF, to get a broader exposure. However, as far as I undestand, it does not really help in getting a higher yield, assuming that covered interest rate parity holds, implying that the cost of the currency hedge should kill any higher yields offered in foreign currencies. Indeed the YTM of the global ETF seems to be similar to those of euro govt bond ETFs. But, maybe it would nevertheless be useful to diversify the credit risk a bit more than what is possible within the eurozone.

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Re: Euro government bond ETFs vs cash, accumulating REIT ETFs?

Post by finvestor » Sat Apr 22, 2017 3:35 pm

Fabio wrote: It's quite new, it was listed just a few days ago on the italian exchange so I guess it's a matter of time before it will be listed on other european exchanges as well. On the Amundi web site you can find the list of countries where it is authorized: Spain, Netherlands, Finland, Sweden, Germany, France, Luxemburg, UK, Austria, Italy, Ireland, Belgium, Switzerland.
Cool, thanks for this info. Then I guess I'll just wait a bit to see if it appears soonish, e.g., on the German exchange where I normally buy ETFs...

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Re: Euro government bond ETFs vs cash, accumulating REIT ETFs?

Post by alpine_boglehead » Sat Apr 22, 2017 3:45 pm

You might consider CDs as part for your fixed income portion ... e.g. in Germany you can get 1.25% for four years at several banks (will still be below the ECB's target inflation rate of 2%), likely even more if you shop around for the best rates in the Eurozone. As Valuethinker already pointed out, stay below the 100k insurance limit (which you would be anyway with your fixed income portion being 90k) and be wary of the really troubled countries. I'm staying below 20k per bank, because in a large-scale meltdown the 100k insurance might not hold (my personal opinion only).

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Re: Euro government bond ETFs vs cash, accumulating REIT ETFs?

Post by Fabio » Sun Apr 23, 2017 9:18 am

finvestor wrote:
Fabio wrote: For the bond fund have you considered the db x-trackers Global Government Bond ETF (DR) 1C (EUR hedged)? It follows the Citi World Government Bond Index Developed Markets, so you would have a broad exposure to government bonds.
That's an interesting ETF, to get a broader exposure. However, as far as I undestand, it does not really help in getting a higher yield, assuming that covered interest rate parity holds, implying that the cost of the currency hedge should kill any higher yields offered in foreign currencies. Indeed the YTM of the global ETF seems to be similar to those of euro govt bond ETFs. But, maybe it would nevertheless be useful to diversify the credit risk a bit more than what is possible within the eurozone.
Yes, a global fixed income allocation (hedged) should provide better diversification and risk reduction. From the Vanguard paper Going global with bonds: Considerations for euro area investors:
Global bonds allow euro zone investors to diversify their fixed income portfolio through exposure to interest rate movements influenced by a variety of international risk factors. We have shown that the currency exposure of un-hedged global bonds adds volatility to a portfolio and, without aggressive assumptions regarding unexpected currency return, is unlikely to benefit investors over the long-term. With currency risk hedged back to euro, the global fixed income market can fulfil the traditional role of bonds by providing risk-reduction and diversification benefits. While differences in performance characteristics between euro zone bonds and the global market have been modest over our sample, we ask the question: Why not go global?With a potentially low-cost hurdle to exposure and no negative impact over the sample, there is little reason for total return investors not to expand their investment set. Indeed, without a prior view on which bond markets will produce superior performance, the global market can be considered the neutral forward-looking portfolio. With the euro zone bond market representing a relatively small portion of the world’s fixed income securities, we would encourage investors to consider how a global bond allocation may help them meet their broad investment objectives in a strategic asset allocation.
The paper is really interesting and worth reading.

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Re: Euro government bond ETFs vs cash, accumulating REIT ETFs?

Post by finvestor » Tue Apr 25, 2017 7:24 am

Fabio wrote:
finvestor wrote:
Fabio wrote: For the bond fund have you considered the db x-trackers Global Government Bond ETF (DR) 1C (EUR hedged)? It follows the Citi World Government Bond Index Developed Markets, so you would have a broad exposure to government bonds.
That's an interesting ETF, to get a broader exposure. However, as far as I undestand, it does not really help in getting a higher yield, assuming that covered interest rate parity holds, implying that the cost of the currency hedge should kill any higher yields offered in foreign currencies. Indeed the YTM of the global ETF seems to be similar to those of euro govt bond ETFs. But, maybe it would nevertheless be useful to diversify the credit risk a bit more than what is possible within the eurozone.
Yes, a global fixed income allocation (hedged) should provide better diversification and risk reduction. From the Vanguard paper Going global with bonds: Considerations for euro area investors:

The paper is really interesting and worth reading.
Thanks, read it, indeed quite interesting. As an aside, it is funny how its says "For professional investors only. Not to be given to retail investors." Does Vanguard think that retail investors should not be informed about such things? :) :shock:

Anyway, the ETF you suggest is interesting, and I'm seriously considering adding it into my portfolio as the "core" fixed income instrument. Then again, I have read from somewhere that ETFs do not work very well for bonds, given that bonds are not as liquid as stocks. Apparently this could create some problems regarding, e.g., the correct pricing of the bond ETF. How do you see this issue from the point of view of a long-term buy&hold investor? Would it be better to go for a mutual fund instead (even if that would have a somewhat higher TER)?

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Re: Euro government bond ETFs vs cash, accumulating REIT ETFs?

Post by Fabio » Tue Apr 25, 2017 2:33 pm

finvestor wrote: Thanks, read it, indeed quite interesting. As an aside, it is funny how its says "For professional investors only. Not to be given to retail investors." Does Vanguard think that retail investors should not be informed about such things? :) :shock:
I noticed that :) BTW Vanguard published a very similar paper for US investors, which does not have that note.
finvestor wrote: Anyway, the ETF you suggest is interesting, and I'm seriously considering adding it into my portfolio as the "core" fixed income instrument. Then again, I have read from somewhere that ETFs do not work very well for bonds, given that bonds are not as liquid as stocks. Apparently this could create some problems regarding, e.g., the correct pricing of the bond ETF. How do you see this issue from the point of view of a long-term buy&hold investor? Would it be better to go for a mutual fund instead (even if that would have a somewhat higher TER)?
Yes, there are some drawbacks in using ETF for fixed income, but personally I don't think they matter much for a long-term buy and hold investor. Besides in many european countries mutual funds have much higher expense ratios than ETFs so much so that they are not a viable option.

To quote William Bernstein about bond ETFs:
There are certain circumstances where the chosen wrapper does make a difference, the most important area being bonds. I highly recommend that you avoid all ETF bond funds. To understand why, I’ll need to explain some of the trading mechanics involved. An ETF, unlike an open-end fund, trades throughout the day at a discount or premium relative to the net asset value (NAV) of the underlying shares. In most cases, the spread between the two is minimal because shares are both created and liquidated by independent agents: “authorized participants” (AP) who buy up the securities underlying the funds and bundle them into ETF shares that are then delivered to the fund company. The same process also works in reverse to liquidate ETF shares. Were a significant spread to open up between the market price and NAV, the AP, in theory, should simply arbitrage that away at a profit.

This mechanism works well with stocks, which are highly liquid, but not with bonds, which are not. There is, for example, only one commonly traded class of Ford Motor Company stock. By contrast, Ford has a range of bonds of varying issue dates, coupons, and maturities. Since there are so many more individual bonds than stocks, the bonds can be highly illiquid. During a financial disturbance, when liquidity becomes even thinner and most corporate bonds trade only “by appointment,” the AP mechanism fails, often at considerable disadvantage to the shareholder. The open-end fund holder, who can always buy and sell at the 4 p.m. (eastern standard time) NAV, has no such problem.

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Re: Euro government bond ETFs vs cash, accumulating REIT ETFs?

Post by markka » Tue Aug 29, 2017 5:26 am

finvestor wrote:
Thu Apr 20, 2017 1:51 pm
The problem is the bond part: In principle I would like to just pick a low cost Euro govt bond ETF (there seems to be an accumulating one from DB X-Trackers with a low enough TER), but the yields of those are currently close to zero. Thus, I'm having hard time trying to figure out if it makes sense to take interest rate risk if the expected reward for taking that risk is close to zero, or if it would
be better to just stick with 30% cash for now, and move to bonds if/when the interest rates would get a bit higher. Any advice or opinions on this issue would be appreciated :)

The second point I'm contemplating is if I should include a REIT ETF as a part of my stock portfolio (maybe 10-15%). There, the main issue is that I could not really find any accumulating REIT ETFs. If you know of any, it would be great if you could let me know as well! :)
May I ask what solution did you go with, in the end?

I'm currently contemplating the same questions with regards to bond and REIT ETFs. In addition to the accumulating REIT ETFs mentioned above, I found SPDR FTSE EPRA Europe ex UK Real Estate UCITS ETF (ZPRP), which I might use since it's accumulating, has a TER of 0.30% (slightly lower than the db x-trackers one) and it's listed in the German stock exchange. However, I'm wondering if it has enough diversification, as it's only investing in Europe, but in addition to the Amundi one (which still isn't listed in Germany), there doesn't seem to be any global options.

Also curious about how you solved the dilemma with bonds.

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Re: Euro government bond ETFs vs cash, accumulating REIT ETFs?

Post by finvestor » Sun Nov 05, 2017 8:01 am

markka wrote:
Tue Aug 29, 2017 5:26 am
finvestor wrote:
Thu Apr 20, 2017 1:51 pm
The problem is the bond part: In principle I would like to just pick a low cost Euro govt bond ETF (there seems to be an accumulating one from DB X-Trackers with a low enough TER), but the yields of those are currently close to zero. Thus, I'm having hard time trying to figure out if it makes sense to take interest rate risk if the expected reward for taking that risk is close to zero, or if it would
be better to just stick with 30% cash for now, and move to bonds if/when the interest rates would get a bit higher. Any advice or opinions on this issue would be appreciated :)

The second point I'm contemplating is if I should include a REIT ETF as a part of my stock portfolio (maybe 10-15%). There, the main issue is that I could not really find any accumulating REIT ETFs. If you know of any, it would be great if you could let me know as well! :)
May I ask what solution did you go with, in the end?

I'm currently contemplating the same questions with regards to bond and REIT ETFs. In addition to the accumulating REIT ETFs mentioned above, I found SPDR FTSE EPRA Europe ex UK Real Estate UCITS ETF (ZPRP), which I might use since it's accumulating, has a TER of 0.30% (slightly lower than the db x-trackers one) and it's listed in the German stock exchange. However, I'm wondering if it has enough diversification, as it's only investing in Europe, but in addition to the Amundi one (which still isn't listed in Germany), there doesn't seem to be any global options.

Also curious about how you solved the dilemma with bonds.

Sorry for my long silence, I have not been reading the forum for some time.

For the REITS, I eventually went with the AMUNDI INDEX FTSE EPRA NAREIT GLOBAL UCITS ETF (listed in Paris, which is not ideal, but accessible through one of my brokers). So far not a great investment return-wise, I think chiefly because of the way currencies (mostly EUR vs USD) have been moving during recent months.

The dilemma with bonds is still partially unsolved, as most of the money I would in principle like to invest in bonds is still sitting in a savings account yielding 0.x %. I did buy a small chunk of the db x-trackers Eurozone Government Bond ETF (DBXN), but I'm hesitating to buy more even if I would like to, given the low YTM (~ 1 %), which, as far as I understand, is partly due to ECB continuing its bond purchasing program. In general I subscribe to the idea of avoiding market timing, but in this case I'm not sure, as my impression is that the prices of eurozone government bonds are not entirely set by "normal" market participants, given the reduced but still rather substantial €30 billion monthly purchases by the ECB.

Actually, related to the last point, if someone knows if it is possible to estimate how much such purchases by the central bank might be expected to push up bond prices, please let me know. For instance, how does the typical monthly trading volume of bonds compare to €30 billion, i.e., how important player ECB is in the market when it comes to setting the bond prices?

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Re: Euro government bond ETFs vs cash, accumulating REIT ETFs?

Post by Valuethinker » Sun Nov 05, 2017 10:30 am

finvestor wrote:
Sun Nov 05, 2017 8:01 am


Actually, related to the last point, if someone knows if it is possible to estimate how much such purchases by the central bank might be expected to push up bond prices, please let me know. For instance, how does the typical monthly trading volume of bonds compare to €30 billion, i.e., how important player ECB is in the market when it comes to setting the bond prices?
It's hard to know but I remember one estimate for QE, and I think it was for UK gilts (c. £1 trillion in issue, B of E now owns c. 30%) that it was worth 1-1.5% of yield (presumably at the 10 year gilt) ie an inward shift of the yield curve across maturities of about that much.

The thing is the bond market can see them coming-- it has handed profits to the bond dealers (which given the capital position of UK banks post Crash, that might be described as "a feature, not a bug" of the software).

My guess is it has probably pushed Eurozone yields in by 1.0% at least. In the case of the more stressed Eurozone countries (Italy in particular, with its huge govt bond market, the largest in the Eurozone) it probably has had a greater effect.

The impact has spilled over into mortgage backed and corporate securities. Eurozone financial institutions have been buying *Canadian* covered bonds (a covered bond is a securitization, but with credit recourse back to the issuer by the investors, whereas with a conventional MBS that is not the case unless you can prove fraud in the issue of the bonds; GNMA bonds do have full recourse back to the US Treasury (de jure) but FNMA and FMAC it is only de facto).

So European funds have gone into the Canadian mortgage market-- and Canada (along with Australia, NZ, Sweden, HK) has the worst housing bubble in the world right now.

Remember though that a significant part of the effect of QE comes through the devaluation of the currency. The 2 main ways lower interest rates work to stimulate the economy are:

- interest rate sensitive sectors like housebuilding & construction, consumer durables like cars
- via a lower exchange rate stimulating exports, tourism and import substitution

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Re: Euro government bond ETFs vs cash, accumulating REIT ETFs?

Post by Lithuanian » Sun Nov 05, 2017 11:43 am

Here is my broad intuition, although I might be wrong. It's true that the ECB's actions have had a significant effect on yields in the eurozone. However, that does not mean that this information could somehow be exploited to do 'market timing'. For instance, it is possible that the ECB will continue these policies for the foreseeable future. So if one thought that buying eurozone bonds later would be a good decision (as interest rates should rise), one would be incurring opportunity costs by not receiving the current bond payments (however meagre those might be), and this might continue for (much) longer that one expects (also, the yields could still go lower, sending bond prices up).

That being said, this logic applies to comparing investment into eurozone bonds now versus doing that at some point in the future. It does not apply to the comparison between, say, eurozone bonds and deposits at commercial banks. If the latter are offering better returns for the same maturity, and are also safe (guaranteed by creditworthy eurozone governments), then I think there is a very strong case of putting money into deposits rather than eurozone bonds. Market efficiency is not being violated because there are certain limits as to who can put their money into deposits and in what amounts.

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Re: Euro government bond ETFs vs cash, accumulating REIT ETFs?

Post by finvestor » Tue Nov 07, 2017 8:47 am

Lithuanian wrote:
Sun Nov 05, 2017 11:43 am
Here is my broad intuition, although I might be wrong. It's true that the ECB's actions have had a significant effect on yields in the eurozone. However, that does not mean that this information could somehow be exploited to do 'market timing'. For instance, it is possible that the ECB will continue these policies for the foreseeable future. So if one thought that buying eurozone bonds later would be a good decision (as interest rates should rise), one would be incurring opportunity costs by not receiving the current bond payments (however meagre those might be), and this might continue for (much) longer that one expects (also, the yields could still go lower, sending bond prices up).

That being said, this logic applies to comparing investment into eurozone bonds now versus doing that at some point in the future. It does not apply to the comparison between, say, eurozone bonds and deposits at commercial banks. If the latter are offering better returns for the same maturity, and are also safe (guaranteed by creditworthy eurozone governments), then I think there is a very strong case of putting money into deposits rather than eurozone bonds. Market efficiency is not being violated because there are certain limits as to who can put their money into deposits and in what amounts.
Valuethinker and Lithuanian, thank you for your insightful comments.

Indeed one can find arguments both for and against buying eurozone government bonds as the "safe" part of the portfolio, given the current market situation affected by ECB's actions. It looks like my solution for the time being will be to split this part of my portfolio into deposits and a euro govt bond ETF (the one by DB X-trackers, ticker DBXN, as it has a reasonable TER of 0.15%, and is accumulating). Right now I'm mostly in deposits, but I think I'll aim at a 50/50 split between the two in the near future (which I guess properly reflects my ignorance of what the future will bring). In the longer term, if bond yields start to rise, I may move everything to bonds; perhaps such a plan to do some market timing is not considered a deadly sin...:)

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Re: Euro government bond ETFs vs cash, accumulating REIT ETFs?

Post by Valuethinker » Tue Nov 07, 2017 9:32 am

finvestor wrote:
Tue Nov 07, 2017 8:47 am
Lithuanian wrote:
Sun Nov 05, 2017 11:43 am
Here is my broad intuition, although I might be wrong. It's true that the ECB's actions have had a significant effect on yields in the eurozone. However, that does not mean that this information could somehow be exploited to do 'market timing'. For instance, it is possible that the ECB will continue these policies for the foreseeable future. So if one thought that buying eurozone bonds later would be a good decision (as interest rates should rise), one would be incurring opportunity costs by not receiving the current bond payments (however meagre those might be), and this might continue for (much) longer that one expects (also, the yields could still go lower, sending bond prices up).

That being said, this logic applies to comparing investment into eurozone bonds now versus doing that at some point in the future. It does not apply to the comparison between, say, eurozone bonds and deposits at commercial banks. If the latter are offering better returns for the same maturity, and are also safe (guaranteed by creditworthy eurozone governments), then I think there is a very strong case of putting money into deposits rather than eurozone bonds. Market efficiency is not being violated because there are certain limits as to who can put their money into deposits and in what amounts.
Valuethinker and Lithuanian, thank you for your insightful comments.

Indeed one can find arguments both for and against buying eurozone government bonds as the "safe" part of the portfolio, given the current market situation affected by ECB's actions. It looks like my solution for the time being will be to split this part of my portfolio into deposits and a euro govt bond ETF (the one by DB X-trackers, ticker DBXN, as it has a reasonable TER of 0.15%, and is accumulating). Right now I'm mostly in deposits, but I think I'll aim at a 50/50 split between the two in the near future (which I guess properly reflects my ignorance of what the future will bring). In the longer term, if bond yields start to rise, I may move everything to bonds; perhaps such a plan to do some market timing is not considered a deadly sin...:)
Bonds pay nearly certain returns in nominal terms (that's only true after inflation if you use inflation-linked bonds).

Your liabilities are your future spending needs.

It is not market timing to switch more towards bonds/ fixed income if the yields are attractive enough to allow you to hedge your future liabilities.

If it's just tactical asset allocation you are unlikely to get it right. But if it is a liability matching exercise then that doesn't matter-- you have increased your hedge on future liabilities.

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Re: Euro government bond ETFs vs cash, accumulating REIT ETFs?

Post by finvestor » Sun Feb 18, 2018 4:12 am

After a long silence, a quick update on bond ETFs for euro investors. iShares has recently launched a new ETF:

https://www.ishares.com/uk/individual/e ... s-etf-fund

It is a globally diversified aggregate bond ETF, available with an accumulating share class hedged to EUR, and has a TER of 0.1%. To me these seem to be good specs. I like especially the low TER, which I think is lower than those of other accumulating euro-nominated bond ETFs I have seen so far. I'm kind of of temped to make this ETF the core part of my bond holdings (I guess it would be a product comparable to BND our US friends are using), but I just wanted to check if I'm missing any obvious shortcoming the ETF may have?

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Re: Euro government bond ETFs vs cash, accumulating REIT ETFs?

Post by Mors » Sun Feb 18, 2018 4:56 am

finvestor wrote:
Sun Feb 18, 2018 4:12 am
After a long silence, a quick update on bond ETFs for euro investors. iShares has recently launched a new ETF:

https://www.ishares.com/uk/individual/e ... s-etf-fund

It is a globally diversified aggregate bond ETF, available with an accumulating share class hedged to EUR, and has a TER of 0.1%. To me these seem to be good specs. I like especially the low TER, which I think is lower than those of other accumulating euro-nominated bond ETFs I have seen so far. I'm kind of of temped to make this ETF the core part of my bond holdings (I guess it would be a product comparable to BND our US friends are using), but I just wanted to check if I'm missing any obvious shortcoming the ETF may have?
The small AUM since it is new I guess. I also consider it a much needed product and a great bond core for the portfolio.

Have you considered adding a small allocation in emerging markets bonds? There are both etfs with EUR hedged USD denominated bonds and with local currency bonds. The former can replace a safe allocation of the portfolio, the latter a stock allocation. The latter also has higher quality bonds usually, since it avoids the potential risk of a runaway inflation in local currency. However they are both a promising asset class and an effective diversifier.

The EUR hedged USD denominated
https://www.justetf.com/de-en/etf-profi ... 0321462953

The local currency one
https://www.justetf.com/de-en/etf-profi ... 00BDS67326

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Re: Euro government bond ETFs vs cash, accumulating REIT ETFs?

Post by finvestor » Mon Feb 19, 2018 4:19 pm

Mors wrote:
Sun Feb 18, 2018 4:56 am
The small AUM since it is new I guess. I also consider it a much needed product and a great bond core for the portfolio.

Have you considered adding a small allocation in emerging markets bonds? There are both etfs with EUR hedged USD denominated bonds and with local currency bonds. The former can replace a safe allocation of the portfolio, the latter a stock allocation. The latter also has higher quality bonds usually, since it avoids the potential risk of a runaway inflation in local currency. However they are both a promising asset class and an effective diversifier.

The EUR hedged USD denominated
https://www.justetf.com/de-en/etf-profi ... 0321462953

The local currency one
https://www.justetf.com/de-en/etf-profi ... 00BDS67326
I agree about the small AUM, although I would be surprised if it would not get bigger in the near future, given the 0.1% TER.

In fact I have a small allocation in EM bonds; it is an actively managed fund - I know, not a very Boglehead kind of choice... Some time ago a writer whose name now escapes me argued that for EM bonds, active management might have an edge, and indeed during recent years the fund has slightly outperformed the currency hedged ETF you linked above. 😊

But I would be a bit careful about saying that currency hedged EM bonds are a good option as a safe part of the portfolio. Looking at the graph that can be found on the justetf page you linked seems to show that in 2008, the ETF experienced a drawdown of approx. 30%...

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Re: Euro government bond ETFs vs cash, accumulating REIT ETFs?

Post by Lauretta » Mon Feb 19, 2018 6:25 pm

finvestor wrote:
Mon Feb 19, 2018 4:19 pm

In fact I have a small allocation in EM bonds; it is an actively managed fund - I know, not a very Boglehead kind of choice... Some time ago a writer whose name now escapes me argued that for EM bonds, active management might have an edge, and indeed during recent years the fund has slightly outperformed the currency hedged ETF you linked above. 😊
May I ask if you would like to share the name of the fund?
I am asking because I know someone who was advised to invest in a Templeton fund in EM bonds and she asked me for an opinion on that or any other fund in the sector. I know there's also one by H2O (it's more a global bond fund and I think they also speculate on currency exchange rates etc) which has performed well, but I wouldn't know whether the results were due to luck or skill.
I personally don't have any EM bond fund though it might be a promising asset class according to some forecasts I've seen e.g by Research Affiliates, so I might begin looking into this.
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Re: Euro government bond ETFs vs cash, accumulating REIT ETFs?

Post by finvestor » Tue Feb 20, 2018 3:20 am

Lauretta wrote:
Mon Feb 19, 2018 6:25 pm
finvestor wrote:
Mon Feb 19, 2018 4:19 pm

In fact I have a small allocation in EM bonds; it is an actively managed fund - I know, not a very Boglehead kind of choice... Some time ago a writer whose name now escapes me argued that for EM bonds, active management might have an edge, and indeed during recent years the fund has slightly outperformed the currency hedged ETF you linked above. 😊
May I ask if you would like to share the name of the fund?
I am asking because I know someone who was advised to invest in a Templeton fund in EM bonds and she asked me for an opinion on that or any other fund in the sector. I know there's also one by H2O (it's more a global bond fund and I think they also speculate on currency exchange rates etc) which has performed well, but I wouldn't know whether the results were due to luck or skill.
I personally don't have any EM bond fund though it might be a promising asset class according to some forecasts I've seen e.g by Research Affiliates, so I might begin looking into this.
It is a fund operated by my bank, not sure if you can access it: https://markets.ft.com/data/funds/tears ... 807532:eur

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Re: Euro government bond ETFs vs cash, accumulating REIT ETFs?

Post by Lauretta » Thu Feb 22, 2018 12:55 pm

finvestor wrote:
Tue Feb 20, 2018 3:20 am
Lauretta wrote:
Mon Feb 19, 2018 6:25 pm
finvestor wrote:
Mon Feb 19, 2018 4:19 pm

In fact I have a small allocation in EM bonds; it is an actively managed fund - I know, not a very Boglehead kind of choice... Some time ago a writer whose name now escapes me argued that for EM bonds, active management might have an edge, and indeed during recent years the fund has slightly outperformed the currency hedged ETF you linked above. 😊
May I ask if you would like to share the name of the fund?
I am asking because I know someone who was advised to invest in a Templeton fund in EM bonds and she asked me for an opinion on that or any other fund in the sector. I know there's also one by H2O (it's more a global bond fund and I think they also speculate on currency exchange rates etc) which has performed well, but I wouldn't know whether the results were due to luck or skill.
I personally don't have any EM bond fund though it might be a promising asset class according to some forecasts I've seen e.g by Research Affiliates, so I might begin looking into this.
It is a fund operated by my bank, not sure if you can access it: https://markets.ft.com/data/funds/tears ... 807532:eur
Thanks, btw the ishares ETF you mentioned is also interesting; at the moment I personally think it's not worth investing in it because the yield of the short maturity bonds is brought down by the hedging costs, and the longer maturity bonds are quite risky because of interest rates rising. Once we don't have short term rates below zero it will certainly be worth considering, and it's cheaper than the db global fund hedged to euro.
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Re: Euro government bond ETFs vs cash, accumulating REIT ETFs?

Post by finvestor » Thu Feb 22, 2018 5:38 pm

Lauretta wrote:
Thu Feb 22, 2018 12:55 pm
Thanks, btw the ishares ETF you mentioned is also interesting; at the moment I personally think it's not worth investing in it because the yield of the short maturity bonds is brought down by the hedging costs, and the longer maturity bonds are quite risky because of interest rates rising. Once we don't have short term rates below zero it will certainly be worth considering, and it's cheaper than the db global fund hedged to euro.
Indeed, the problem is that given the negative short term rates we currently have in the eurozone, also the currency hedged yields to euro of short-term bonds denominated in other currencies will be negative. So euro area investors interested in bonds have only bad options: either invest in euro-denominated bonds, with negative short term rates, or invest in bonds denominated in other currencies such as USD with higher short term rates. In the latter case, the investor would be able to choose between exposure to currency fluctuations which would increase the risk without increasing the expected return, or paying the cost of currency hedging, after which the short term rates would again be negative. Lauretta, does this mean that you don’t think bonds are worth investing at all for euro investors (with the possible exception of EM bonds, although the above problem of currency hedging to euro should apply also in that case), or do you see something in the iShares aggregate bond etf that is particularly problematic from this point of view?

By the way, since part of this discussion is effectively about the cost of currency hedging, maybe you or someone else could enlighten me on the details of that? My understanding is that this cost is basically given by the difference between the short-term rates in the two currencies, but is it just that or are there some other costs involved as well?

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Re: Euro government bond ETFs vs cash, accumulating REIT ETFs?

Post by Lauretta » Thu Feb 22, 2018 6:33 pm

finvestor wrote:
Thu Feb 22, 2018 5:38 pm
Lauretta wrote:
Thu Feb 22, 2018 12:55 pm
Thanks, btw the ishares ETF you mentioned is also interesting; at the moment I personally think it's not worth investing in it because the yield of the short maturity bonds is brought down by the hedging costs, and the longer maturity bonds are quite risky because of interest rates rising. Once we don't have short term rates below zero it will certainly be worth considering, and it's cheaper than the db global fund hedged to euro.
Indeed, the problem is that given the negative short term rates we currently have in the eurozone, also the currency hedged yields to euro of short-term bonds denominated in other currencies will be negative. So euro area investors interested in bonds have only bad options: either invest in euro-denominated bonds, with negative short term rates, or invest in bonds denominated in other currencies such as USD with higher short term rates. In the latter case, the investor would be able to choose between exposure to currency fluctuations which would increase the risk without increasing the expected return, or paying the cost of currency hedging, after which the short term rates would again be negative. Lauretta, does this mean that you don’t think bonds are worth investing at all for euro investors (with the possible exception of EM bonds, although the above problem of currency hedging to euro should apply also in that case), or do you see something in the iShares aggregate bond etf that is particularly problematic from this point of view?

By the way, since part of this discussion is effectively about the cost of currency hedging, maybe you or someone else could enlighten me on the details of that? My understanding is that this cost is basically given by the difference between the short-term rates in the two currencies, but is it just that or are there some other costs involved as well?
Hi Finvestor concerning your first question, indeed I don't think bonds are worth investing in for euro investors at the moment because of negative rates and the problems you mention. Concerning EM bonds I understand that some are denominated in Euros when they are issued, so they shouldn't have the problem of the cost of hedging. The problem is that they should behave like stocks in a bear market...

Concerning the cost of hedging, yes my understanding is that it is due to interest rates differentials, so that for US investors investing in the Eurozone it works the other way round: they 'get paid' for hedging. See:
https://www.wisdomtree.com/blog/2016-01 ... d-to-hedge

Also, the fees for Etfs doing the hedging are usually a bit higher than for unhedged ETF, but that does not seem to be the case for the iShares Etf you mentioned, for which the fees are indeed very low.
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Re: Euro government bond ETFs vs cash, accumulating REIT ETFs?

Post by finvestor » Fri Feb 23, 2018 4:21 pm

Lauretta wrote:
Thu Feb 22, 2018 6:33 pm
Hi Finvestor concerning your first question, indeed I don't think bonds are worth investing in for euro investors at the moment because of negative rates and the problems you mention. Concerning EM bonds I understand that some are denominated in Euros when they are issued, so they shouldn't have the problem of the cost of hedging. The problem is that they should behave like stocks in a bear market...

Concerning the cost of hedging, yes my understanding is that it is due to interest rates differentials, so that for US investors investing in the Eurozone it works the other way round: they 'get paid' for hedging. See:
https://www.wisdomtree.com/blog/2016-01 ... d-to-hedge

Also, the fees for Etfs doing the hedging are usually a bit higher than for unhedged ETF, but that does not seem to be the case for the iShares Etf you mentioned, for which the fees are indeed very low.
Thanks, Lauretta. I think it is clear that since the cost of currency hedging is due to short maturity interest rate differentials, an investor investing in hedged foreign currency bonds should expect a yield similar to the one paid by the bonds denominated in his/her own currency. This applies also to US investors who would get a yield similar to the US treasuries by investing in currency hedged eurozone government bonds.

But I guess there are some caveats: First, if there are differences in the slopes of the yield curves of the two currencies, one might have some advantage in investing in currency-hedged foreign bonds if bonds issued in that currency have a steeper yield curve than that of the bonds denominated in the home currency of the investor. Then the yield of the long maturity bonds would be higher even after currency hedging than the corresponding yields in the investors’ home currency. Right? If this is correct, it looks like this is currently one more reason to avoid treasuries hedged to euro since it looks like the US yield curve is flatter than that in the eurozone.

Second, and this is something I would like to know and understand: As you mentioned, Lauretta, quite often currency hedged ETFs have a little higher TER. But are there any other, ”hidden” costs associated with currency hedging? Wouldn’t it cost something in excess of the interest rate differential to construct the hedge, related to comissions and such? I’m just trying to figure out the details so that I could make an informed decision, balancing the drawbacks of the cost of currency hedging with the benefits of better diversification, to either use currency hedged global bond ETFs, or stick with euro-denominated bonds.

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Re: Euro government bond ETFs vs cash, accumulating REIT ETFs?

Post by Lauretta » Fri Feb 23, 2018 11:04 pm

finvestor wrote:
Fri Feb 23, 2018 4:21 pm
Lauretta wrote:
Thu Feb 22, 2018 6:33 pm
Hi Finvestor concerning your first question, indeed I don't think bonds are worth investing in for euro investors at the moment because of negative rates and the problems you mention. Concerning EM bonds I understand that some are denominated in Euros when they are issued, so they shouldn't have the problem of the cost of hedging. The problem is that they should behave like stocks in a bear market...

Concerning the cost of hedging, yes my understanding is that it is due to interest rates differentials, so that for US investors investing in the Eurozone it works the other way round: they 'get paid' for hedging. See:
https://www.wisdomtree.com/blog/2016-01 ... d-to-hedge

Also, the fees for Etfs doing the hedging are usually a bit higher than for unhedged ETF, but that does not seem to be the case for the iShares Etf you mentioned, for which the fees are indeed very low.
Thanks, Lauretta. I think it is clear that since the cost of currency hedging is due to short maturity interest rate differentials, an investor investing in hedged foreign currency bonds should expect a yield similar to the one paid by the bonds denominated in his/her own currency. This applies also to US investors who would get a yield similar to the US treasuries by investing in currency hedged eurozone government bonds.

But I guess there are some caveats: First, if there are differences in the slopes of the yield curves of the two currencies, one might have some advantage in investing in currency-hedged foreign bonds if bonds issued in that currency have a steeper yield curve than that of the bonds denominated in the home currency of the investor. Then the yield of the long maturity bonds would be higher even after currency hedging than the corresponding yields in the investors’ home currency. Right? If this is correct, it looks like this is currently one more reason to avoid treasuries hedged to euro since it looks like the US yield curve is flatter than that in the eurozone.

Second, and this is something I would like to know and understand: As you mentioned, Lauretta, quite often currency hedged ETFs have a little higher TER. But are there any other, ”hidden” costs associated with currency hedging? Wouldn’t it cost something in excess of the interest rate differential to construct the hedge, related to comissions and such? I’m just trying to figure out the details so that I could make an informed decision, balancing the drawbacks of the cost of currency hedging with the benefits of better diversification, to either use currency hedged global bond ETFs, or stick with euro-denominated bonds.
Hi finvestor, considering your first point on the shape of the yield curve I agree. My thought however is that the interest of having a global bond Etf is more related to credit risk: unlike US investors who can consider their government bonds as basically risk-free as far as default risk is concerned, I am not so sure the same is true about Eurozone bonds. For example in Italy there is sometimes talk of exiting the eurozone and repaying sovreign debt in lire: so this would be a way of repaying less and be equivalent to a partial default, as the lira would be devalued relative to the euro. I even saw a detailed discussion in a paper by Bankitalia (and in some newpapers) of the economic impact and the legal implications of this (some bonds would be easier to repay in the local currency than others, depending on a number of legal parameters).
I am not saying that this is likely, but the fact that it is discussed indicates that it is a possibility. There was also talk of France exiting the eurozone, with similar implications, during the previous presidential campaign. So there are all sorts of risks that are very difficult to assess but which would be decreased in my opinion by buying global bonds hedged to euro - even though for this to be useful one must still assume that their home country will not exit the eurozone and above all that the eurozone will not desintegrate. Anyway, difficult questions with lots of parameters to consider.

Considering your second point, I am not aware of hidden costs in hedged Etfs. I understand that the TER should include all other costs (like in Etfs for stocks the TER seems to include for example the cost of turnover, beside the fees paid to the company running the Etf), but I really don't know much about the practicalities of Etfs but I would be interested to find out more. If you or anyone on this forum finds out more about this question I would be quite interested.
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Re: Euro government bond ETFs vs cash, accumulating REIT ETFs?

Post by BeBH65 » Sat Feb 24, 2018 2:09 am

Hello,

It is my understanding that the ER of European Etf's represent all the costs relate to the "management" of the fund, but do not include the cost the fund incur due to the trading of its assets. In my experience if fact sheets of eu-domiciled Eft's have two entries for ER and TER then the amounts are the same.
It is also my understanding that the contracts that the fund enters in to hedge the currency exposure are "assets" of the fund, and hence equally not part of the TER.

Regards,

Edited to correct spelling mistakes
Last edited by BeBH65 on Sat Feb 24, 2018 5:10 am, edited 1 time in total.
BeBH65. (only an investment enthusiast, not a financial adviser, perform your due diligence).

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Re: Euro government bond ETFs vs cash, accumulating REIT ETFs?

Post by Lauretta » Sat Feb 24, 2018 4:17 am

BeBH65 wrote:
Sat Feb 24, 2018 2:09 am
Hello,

It is my understanding that the ER do European Etf's represent all the costs relate to the "management" of the fund, but do not include the cost the fund incur due to the trading of its assets. In my experience if fact sheets of eu-domiciled Eft's have two entries for ER and TER then the amounts are the same.
It is also my understanding that the contracs that the fund enters in to hedge the currency exposure are "assets" of the fund, and hence equally not part of the TER.

Regards,
Thanks for your feedback. I agree that the contracts that the fund enters in to hedge the currency exposure are not part of the TER. So they should be considered in addition to it.

Concerning trading costs, I once wrote to Vanguard concerning one of their funds with high turnover, and here's their reply
Good afternoon,

Thank you for your email.

Please be advised that all of our OCFs cover the costs of trading.

Due to the fact that our ETFs are only available through brokers, there may be additional trading costs levied by the broker. Otherwise, there is no additional cost payable by investors. Broker fees will also have to be considered by investors when working out total costs associated.
OCF is equivalent I think of TER.
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Re: Euro government bond ETFs vs cash, accumulating REIT ETFs?

Post by BeBH65 » Sat Feb 24, 2018 8:26 am

Hello Lauretta et al,

I believe we that we are saying the same thing. Just for the good comprehension of all here is some more info based on M*.

My understanding (and I would welcome correction):
Return_of_the_fund = return_of_the_assets - ongoing_charge - performance_fees - cost_of_the_fund_for_trading_its_assets + possible_income_from_lending


for AGGH M* mentions Ongoing Charge 24/01/2018 0.10%
Morningstar wrote:Ongoing Charge
The Ongoing Charge represents the costs you can reasonably expect to pay as an investor from one year to the next, under normal circumstances. Many investors will be used to looking most closely at the Annual Management Charge, but neither this charge nor the Ongoing Charge includes the performance fees incurred so neither is perfect. However, the Ongoing Charge does represent a more accurate cost of fund ownership as it encompasses the fund’s professional fees, management fees, audit fees and custody fees.
Morningstar wrote:Management charge
A fee, usually expressed as a percentage, charged by the investment manager to cover the costs of running the fund. It is deducted from the net assets of the fund.



Related to the hedging contracts: the ishares site allows to download the assets of the ETFs and it mentions the forward contracts. They look to hedge the currencies on a monthly base.
BeBH65. (only an investment enthusiast, not a financial adviser, perform your due diligence).

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Re: Euro government bond ETFs vs cash, accumulating REIT ETFs?

Post by Lauretta » Sat Feb 24, 2018 9:27 am

BeBH65 wrote:
Sat Feb 24, 2018 8:26 am
Hello Lauretta et al,

I believe we that we are saying the same thing. Just for the good comprehension of all here is some more info based on M*.

My understanding (and I would welcome correction):
Return_of_the_fund = return_of_the_assets - ongoing_charge - performance_fees - cost_of_the_fund_for_trading_its_assets + possible_income_from_lending


for AGGH M* mentions Ongoing Charge 24/01/2018 0.10%
Morningstar wrote:Ongoing Charge
The Ongoing Charge represents the costs you can reasonably expect to pay as an investor from one year to the next, under normal circumstances. Many investors will be used to looking most closely at the Annual Management Charge, but neither this charge nor the Ongoing Charge includes the performance fees incurred so neither is perfect. However, the Ongoing Charge does represent a more accurate cost of fund ownership as it encompasses the fund’s professional fees, management fees, audit fees and custody fees.
Morningstar wrote:Management charge
A fee, usually expressed as a percentage, charged by the investment manager to cover the costs of running the fund. It is deducted from the net assets of the fund.



Related to the hedging contracts: the ishares site allows to download the assets of the ETFs and it mentions the forward contracts. They look to hedge the currencies on a monthly base.
Hi, thanks for your answer. All you say makes sense to me except that I had understood that the cost_of_the_fund_for_trading_its_assets was actually part of the Ongoing charges. I will write more in detail during next week with a couple of examples as I don't have a regular connection now. However if the cost_of_the_fund_for_trading_its_assets is not included in the ongoing charges then some Etfs like VMOM will actually be significantly more expensive than stated in the Ongoing charges, because of the high turnover of momentum strategies (my quote of the Vanguard email in my earlier post referred to an enquiry I had made on that Etf and I had understood from their reply that there weren't any extra costs due to trading the fund's assets).
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Re: Euro government bond ETFs vs cash, accumulating REIT ETFs?

Post by Lauretta » Sat Feb 24, 2018 10:04 am

Indeed I think BeBH65 you are right, thanks for pointing this out, :happy transaction costs to buy the shares held within the fund do not seem to be included in the Ongoing charges, as also stated here.
https://en.wikipedia.org/wiki/Total_expense_ratio
On the other hand active funds have 'turnover fees' (commissions de movement) which are actually part of the ongoing charges,
http://www.morningstar.fr/fr/news/11479 ... onds-.aspx
but now I understand that they don't go towards paying the transaction costs, they seem just to make an extra profit for the active manager...
Anyway that's my understanding at the moment. Do you agree with all this?
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Re: Euro government bond ETFs vs cash, accumulating REIT ETFs?

Post by finvestor » Sat Feb 24, 2018 2:39 pm

Thank you for your comments.

While reading more generally about the effect of currency hedging on the performance of international bond funds, I found this Vanguard document to be useful:

https://personal.vanguard.com/pdf/ISGHC.pdf

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