European alternative to VXUS

For investors outside the US. Personal investments, personal finance, investing news and theory.
Sister forums: Canada, Spain (en español)
---------------
Post Reply
Topic Author
ripper23
Posts: 3
Joined: Wed Jan 16, 2019 5:08 am

European alternative to VXUS

Post by ripper23 » Wed Jan 16, 2019 8:26 am

Hi all

Regulations have change and I can't keep buying VTI+VXUS as I have been doing so far. I have found some reasonable alternatives to VTI, however I'm having trouble finding a cheap ETF (or combination of 2) available to trade in Europe, that gives me similar exposure to VXUS. In particular any Global ex-US ETF suggestion would be great. W/ or w/o EM is not too important, as I can get exposure to EM with a specific fund.

Thank you!
M

TedSwippet
Posts: 2517
Joined: Mon Jun 04, 2007 4:19 pm
Location: UK

Re: European alternative to VXUS

Post by TedSwippet » Wed Jan 16, 2019 5:37 pm

Welcome.
ripper23 wrote:
Wed Jan 16, 2019 8:26 am
Regulations have change and I can't keep buying VTI+VXUS as I have been doing so far.
PRIIPs. It's a bit of a nuisance, isn't it?
ripper23 wrote:
Wed Jan 16, 2019 8:26 am
I have found some reasonable alternatives to VTI, however I'm having trouble finding a cheap ETF (or combination of 2) available to trade in Europe, that gives me similar exposure to VXUS. In particular any Global ex-US ETF suggestion would be great.
I don't think there are any single-fund equivalents. No real call for them among non-US investors. There is VDU from Vanguard Canada, but I don't think that will help you.

Can you say what country you are from? Several very nasty US tax traps await some US non-residents who hold US domiciled ETFs such as VTI and VXUS, and you will want to be certain that you are not sleepwalking into any of them. More in these wiki pages:

Non-US investor's guide to navigating US tax traps - Bogleheads
Nonresident alien's ETF domicile decision table - Bogleheads
Nonresident alien taxation - Bogleheads
Nonresident alien with no US tax treaty & Irish ETFs - Bogleheads

Topic Author
ripper23
Posts: 3
Joined: Wed Jan 16, 2019 5:08 am

Re: European alternative to VXUS

Post by ripper23 » Thu Jan 17, 2019 5:23 am

TedSwippet wrote:
Wed Jan 16, 2019 5:37 pm
Welcome.
Thank you, I have been lurking for a while, finally registered.
TedSwippet wrote:
Wed Jan 16, 2019 5:37 pm
PRIIPs. It's a bit of a nuisance, isn't it?
Mostly because it feels like it is not made at all to protect the investors but just to force them to invest in european products.
TedSwippet wrote:
Wed Jan 16, 2019 5:37 pm
I don't think there are any single-fund equivalents. No real call for them among non-US investors. There is VDU from Vanguard Canada, but I don't think that will help you.

Can you say what country you are from? Several very nasty US tax traps await some US non-residents who hold US domiciled ETFs such as VTI and VXUS, and you will want to be certain that you are not sleepwalking into any of them. More in these wiki pages:
Thanks. I live in Switzerland, I think I am decently informed about the implications of US-domiciled ETFs for swiss investors thanks to some amazing swiss communities such as Mustachian post, but I will have a look nonetheless, thanks :)

TedSwippet
Posts: 2517
Joined: Mon Jun 04, 2007 4:19 pm
Location: UK

Re: European alternative to VXUS

Post by TedSwippet » Thu Jan 17, 2019 5:58 am

ripper23 wrote:
Thu Jan 17, 2019 5:23 am
TedSwippet wrote:
Wed Jan 16, 2019 5:37 pm
PRIIPs. It's a bit of a nuisance, isn't it?
Mostly because it feels like it is not made at all to protect the investors but just to force them to invest in european products.
I hear you. In the past, UK investors could also find a small tax benefit from holding US domiciled funds, particularly in retirement savings accounts, but no longer. Still, thanks to long-standing and utterly heinous US PFIC tax rules, US investors are effectively forced into US domiciled products. At least now there is a symmetry to these restrictions!

It is interesting to hear that Swiss investors are unable to use US domiciled ETFs due to PRIIPs. MiFID and PRIIPs are both EU regulations, and while Switzerland is in Europe it is not in the EU. You might think that would give Swiss investors a let-out on this, but apparently not. Maybe its an EEA thing. Anyway, thanks for the data point.
ripper23 wrote:
Thu Jan 17, 2019 5:23 am
I live in Switzerland, I think I am decently informed about the implications of US-domiciled ETFs for swiss investors thanks to some amazing swiss communities such as Mustachian post, ...
It sounds like you are in good shape here, then. Not so for all European countries though, which is why I asked.

Topic Author
ripper23
Posts: 3
Joined: Wed Jan 16, 2019 5:08 am

Re: European alternative to VXUS

Post by ripper23 » Thu Jan 17, 2019 6:52 am

TedSwippet wrote:
Thu Jan 17, 2019 5:58 am


It is interesting to hear that Swiss investors are unable to use US domiciled ETFs due to PRIIPs. MiFID and PRIIPs are both EU regulations, and while Switzerland is in Europe it is not in the EU. You might think that would give Swiss investors a let-out on this, but apparently not. Maybe its an EEA thing. Anyway, thanks for the data point.
You are right in the sense that PRIIPs do not apply to Switzerland. However:

1 - Switzerland just recently passed almost identical regulation for swiss investors that will start 1 January 2020.
2 - Even though some brokers still sell US funds (because it is possible, but probably not from 2020), some others including mine don't.

So, no real european equivalent for VXUS. I guess I'm stuck with VWLR then.

finrod_2002
Posts: 29
Joined: Fri Feb 15, 2019 6:04 am

Re: European alternative to VXUS

Post by finrod_2002 » Sat Feb 16, 2019 3:36 am

Regulations have change and I can't keep buying VTI+VXUS as I have been doing so far.
I've found a workaround for this. It is possible to buy VTI and/or VXUS and/or other ETFs without PRIIPs via the option route.

Basically, you buy a call option or sell a put option and get the underlying VTI and VXUS. The call option is a little more expensive overall, but you're sure to get what you want, the underlying shares. With a put option you get the option premium, but the counterparty might decide to not exercise the option and so you don't get what you've wanted. Not to big of a deal, since you can retry and in the meantime you've got the premium.

A drawback, apart of its complexity maybe, is that you have to buy in lots of 100s. So, this way, a dollar cost averaging strategy is almost impossible to implement.

Valuethinker
Posts: 39072
Joined: Fri May 11, 2007 11:07 am

Re: European alternative to VXUS

Post by Valuethinker » Sat Feb 16, 2019 7:16 am

ripper23 wrote:
Wed Jan 16, 2019 8:26 am
Hi all

Regulations have change and I can't keep buying VTI+VXUS as I have been doing so far. I have found some reasonable alternatives to VTI, however I'm having trouble finding a cheap ETF (or combination of 2) available to trade in Europe, that gives me similar exposure to VXUS. In particular any Global ex-US ETF suggestion would be great. W/ or w/o EM is not too important, as I can get exposure to EM with a specific fund.

Thank you!
M
I think this entire discussion underlines why one should never just post the tickers of funds or stocks.

It basically makes the conversation meaningless to me unless I go look up what you are talking about.

I am based in the UK, I invest globally, I have a lot of posts (which does not mean I am well informed ;-)).

But this thread might as well be in Greek for all I can read it

"I can't keep buying blech+blue blech.... other ex-US ETF suggestions would be great"

OK so I use VWRD and something else, it's a value fund, IWVL. In fact I use the Vanguard one (which has high US exposure) and the ishares one (which has a much higher exposure to Japan in particular).

Is that clear? ;-).

Post Reply