UK investor. Access to Emerging Value without currency conversion charge

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Topic Author
LongTermInvestor88
Posts: 63
Joined: Mon Dec 25, 2017 9:18 am

UK investor. Access to Emerging Value without currency conversion charge

Post by LongTermInvestor88 » Wed Aug 28, 2019 7:12 am

Hi all I'm contemplating a holding in emerging value preferably an index fund. The possibilities I have found so far are ETF's based on MSCI emerging value index. Unfortunately all of these seem to have a base currency of U.S dollars and any platform that I would hold them within charge around 1% for currency conversion when buying and selling. Has anybody been able to access this or similar fund without incurring these charges. Thanks

actuallyxy
Posts: 44
Joined: Wed May 24, 2017 6:25 am

Re: UK investor. Access to Emerging Value without currency conversion charge

Post by actuallyxy » Wed Aug 28, 2019 7:33 am

Check with your platform. My understanding is that currency conversion fees apply only to foreign shares, not to funds or ETFs traded at the London Stock Exchange, regardless of base currency

What funds have you identified for EM Value? These are the ones I'm aware of:

iShares Edge MSCI EM Value Factor ETF
Invesco FTSE RAFI Emerging Markets ETF
Wisdomtree EM equity income ETF (dividends rather than value)
Wisdomtree EM smallcap dividend (dividends rather than value, and smallcap)

I have bought several of these without conversion fees.

Topic Author
LongTermInvestor88
Posts: 63
Joined: Mon Dec 25, 2017 9:18 am

Re: UK investor. Access to Emerging Value without currency conversion charge

Post by LongTermInvestor88 » Wed Aug 28, 2019 7:48 am

actuallyxy wrote:
Wed Aug 28, 2019 7:33 am
Check with your platform. My understanding is that currency conversion fees apply only to foreign shares, not to funds or ETFs traded at the London Stock Exchange, regardless of base currency

What funds have you identified for EM Value? These are the ones I'm aware of:

iShares Edge MSCI EM Value Factor ETF
Invesco FTSE RAFI Emerging Markets ETF
Wisdomtree EM equity income ETF (dividends rather than value)
Wisdomtree EM smallcap dividend (dividends rather than value, and smallcap)

I have bought several of these without conversion fees.
Thanks Actually I have been advised of this to regarding LSE but emailed Interactive investor today and they said there is currency conversion charge. Also other platforms aren't very clear with this. The fund interested in is iShares Edge MSCI EM Value Factor ETF what platform did you hold this on? Also have you managed to spot any em small value index funds available to U.K investors this seems to be unavailable at present. Thanks

silverex
Posts: 91
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Location: Vilnius, Lithuania

Re: UK investor. Access to Emerging Value without currency conversion charge

Post by silverex » Wed Aug 28, 2019 7:57 am

ETF currency (reporting currency) is irrelevant for you, see: https://www.bogleheads.org/wiki/EU_inve ... ying_asset

You buy the ETF in the currency of the exchange that you're using. If you want to buy in EUR, just use Xetra, Amsterdam or Milan exchanges, but not the LSE. That of course depends on which exchanges these ETFs are crosslisted.

Interactive Brokers I think returns different search results for different currencies of same ETF, and then when buying, you choose a specific exchange, or a "SMART" exchange that will get the lowest price exchange among the same currency exchanges.

TedSwippet
Posts: 2661
Joined: Mon Jun 04, 2007 4:19 pm
Location: UK

Re: UK investor. Access to Emerging Value without currency conversion charge

Post by TedSwippet » Wed Aug 28, 2019 8:12 am

LongTermInvestor88 wrote:
Wed Aug 28, 2019 7:48 am
Thanks Actually I have been advised of this to regarding LSE but emailed Interactive investor today and they said there is currency conversion charge. Also other platforms aren't very clear with this.
You need to distinguish between an ETF's denomination (or base) currency and its trading currency (or currencies). The first of these is just a metric for keeping score of performance. The second is where you would have to pay a forex charge if the ETF does not trade in the currency you have (so GBP, in this case). More (much, much more!) in this wiki page:

Non-US investors and ETF currencies - Bogleheads

From a quick look, it indeed seems that the iShares ETF mentioned does only trade in USD, so there would be a forex drag there on both purchase and sale for a GBP investor. At least the first WisdomTree ETF lists in London in GBP, though (as DEM, DEM LN, WTDEM.L, BQQ3Q17, and actually in GBX, but that's just 100x GBP, that is pennies, not pounds).

I haven't looked at the details of the other WisdomTree ETF, and couldn't easily find what I was looking for at Invesco for some reason.

actuallyxy
Posts: 44
Joined: Wed May 24, 2017 6:25 am

Re: UK investor. Access to Emerging Value without currency conversion charge

Post by actuallyxy » Wed Aug 28, 2019 8:16 am

I've used Iweb and AJ Bell without conversion charges. I am very surprised that Interactive Investor is different. Maybe the person who answered your question was clueless it didn't understand.

In terms of EM small value in the UK, I'm only aware of two options:

Dimensional EM Targeted Value Fund
Unfortunately Dimensional Funds are only available using a financial adviser, and it's not worth the fees

Wisdomtree EM Smallcap Dividend ETF
This is a dividend ETF rather than a value ETF, but its holdings look reasonably small and valuey.

actuallyxy
Posts: 44
Joined: Wed May 24, 2017 6:25 am

Re: UK investor. Access to Emerging Value without currency conversion charge

Post by actuallyxy » Wed Aug 28, 2019 9:56 am

Thanks for that explanation, TedSwippet. I didn't know about that.

Topic Author
LongTermInvestor88
Posts: 63
Joined: Mon Dec 25, 2017 9:18 am

Re: UK investor. Access to Emerging Value without currency conversion charge

Post by LongTermInvestor88 » Wed Aug 28, 2019 1:08 pm

TedSwippet wrote:
Wed Aug 28, 2019 8:12 am
LongTermInvestor88 wrote:
Wed Aug 28, 2019 7:48 am
Thanks Actually I have been advised of this to regarding LSE but emailed Interactive investor today and they said there is currency conversion charge. Also other platforms aren't very clear with this.
You need to distinguish between an ETF's denomination (or base) currency and its trading currency (or currencies). The first of these is just a metric for keeping score of performance. The second is where you would have to pay a forex charge if the ETF does not trade in the currency you have (so GBP, in this case). More (much, much more!) in this wiki page:

Non-US investors and ETF currencies - Bogleheads

From a quick look, it indeed seems that the iShares ETF mentioned does only trade in USD, so there would be a forex drag there on both purchase and sale for a GBP investor. At least the first WisdomTree ETF lists in London in GBP, though (as DEM, DEM LN, WTDEM.L, BQQ3Q17, and actually in GBX, but that's just 100x GBP, that is pennies, not pounds).

I haven't looked at the details of the other WisdomTree ETF, and couldn't easily find what I was looking for at Invesco for some reason.
Thanks Ted very helpful
actuallyxy wrote:
Wed Aug 28, 2019 8:16 am
I've used Iweb and AJ Bell without conversion charges. I am very surprised that Interactive Investor is different. Maybe the person who answered your question was clueless it didn't understand.

In terms of EM small value in the UK, I'm only aware of two options:

Dimensional EM Targeted Value Fund
Unfortunately Dimensional Funds are only available using a financial adviser, and it's not worth the fees

Wisdomtree EM Smallcap Dividend ETF
This is a dividend ETF rather than a value ETF, but its holdings look reasonably small and valuey.
I'm looking more into the ftse rafi emerging index this may not give me that much small cap exposure but it does seem to be very valuey and is traded on LSE and with GBP

actuallyxy
Posts: 44
Joined: Wed May 24, 2017 6:25 am

Re: UK investor. Access to Emerging Value without currency conversion charge

Post by actuallyxy » Wed Aug 28, 2019 1:42 pm

Two other options traded in GBP with some exposure to smaller caps are:

iShares EM Dividend UCITS ETF
Invesco FTSE Emerging Markets High Dividend Low Volatility UCITS ETF

They are dividend ETFs but quite valuey. They have interesting country compositions, with a lot of Russia, and only about 100 holdings.

Topic Author
LongTermInvestor88
Posts: 63
Joined: Mon Dec 25, 2017 9:18 am

Re: UK investor. Access to Emerging Value without currency conversion charge

Post by LongTermInvestor88 » Thu Aug 29, 2019 5:24 am

TedSwippet wrote:
Wed Aug 28, 2019 8:12 am
LongTermInvestor88 wrote:
Wed Aug 28, 2019 7:48 am
Thanks Actually I have been advised of this to regarding LSE but emailed Interactive investor today and they said there is currency conversion charge. Also other platforms aren't very clear with this.
You need to distinguish between an ETF's denomination (or base) currency and its trading currency (or currencies). The first of these is just a metric for keeping score of performance. The second is where you would have to pay a forex charge if the ETF does not trade in the currency you have (so GBP, in this case). More (much, much more!) in this wiki page:

Non-US investors and ETF currencies - Bogleheads

From a quick look, it indeed seems that the iShares ETF mentioned does only trade in USD, so there would be a forex drag there on both purchase and sale for a GBP investor. At least the first WisdomTree ETF lists in London in GBP, though (as DEM, DEM LN, WTDEM.L, BQQ3Q17, and actually in GBX, but that's just 100x GBP, that is pennies, not pounds).

I haven't looked at the details of the other WisdomTree ETF, and couldn't easily find what I was looking for at Invesco for some reason.
Hi Ted just to let you know AJ Bell got back to me today and said both IWVL and EMVL do not infact incur conversion charges. I am surprised at this myself

TedSwippet
Posts: 2661
Joined: Mon Jun 04, 2007 4:19 pm
Location: UK

Re: UK investor. Access to Emerging Value without currency conversion charge

Post by TedSwippet » Thu Aug 29, 2019 5:38 am

LongTermInvestor88 wrote:
Thu Aug 29, 2019 5:24 am
Hi Ted just to let you know AJ Bell got back to me today and said both IWVL and EMVL do not infact incur conversion charges. I am surprised at this myself
Thanks for the note. Shrug.

Mister643
Posts: 33
Joined: Wed Aug 21, 2019 6:00 am

Re: UK investor. Access to Emerging Value without currency conversion charge

Post by Mister643 » Fri Aug 30, 2019 4:06 pm

Hi guys,

Really good thread. I want to be 100% invested in Emerging Markets and Europe (UK stock market will be brilliant option after Brexit).

I'm also searching for EM value ETFs (accumulating). I only found EMVL (from iShares) but my broker (XTB) refuses to add it because it says it has low liquidity. I wanted to start with dollar cost averaging and IB charge much custody fees, I don't like that.

So now I requested to be added the Wisdom Tree EM Equity Income Acc ETF, but as you said, it looks more like high dividend yield than value. Which option do you think it is better? An ETF with 7 PER and 4% Dividend Yield or one with a slightly higher PER - 9% and 6% dividend yield?

For EM small caps I couldn't find anything with accumulating that is value ETF.

actuallyxy
Posts: 44
Joined: Wed May 24, 2017 6:25 am

Re: UK investor. Access to Emerging Value without currency conversion charge

Post by actuallyxy » Sat Aug 31, 2019 7:56 am

I think you may regret excluding the US, which represents 60% of the world markets. I say this as somebody who is underweight US and overweight EM and Europe.

Why must you have accumulating funds? If you like a distributing fund, you can reinvest the dividends yourself. It may be useful to rebalance anyway.

Topic Author
LongTermInvestor88
Posts: 63
Joined: Mon Dec 25, 2017 9:18 am

Re: UK investor. Access to Emerging Value without currency conversion charge

Post by LongTermInvestor88 » Sat Aug 31, 2019 10:46 am

I agree with Actually why would you not want to hold a Developed value index alongside emerging. You are more diversified and the index has a greater choose of value stocks to index for value characteristics. EMVL can be purchased on AJ Bell youinvest. Aj bell have assured me it doesn't charge conversion fees

bgreat
Posts: 108
Joined: Tue Jun 25, 2019 11:48 pm

Re: UK investor. Access to Emerging Value without currency conversion charge

Post by bgreat » Sun Sep 01, 2019 3:00 am

LongTermInvestor88 wrote:
Wed Aug 28, 2019 7:12 am
Hi all I'm contemplating a holding in emerging value preferably an index fund. The possibilities I have found so far are ETF's based on MSCI emerging value index. Unfortunately all of these seem to have a base currency of U.S dollars and any platform that I would hold them within charge around 1% for currency conversion when buying and selling. Has anybody been able to access this or similar fund without incurring these charges. Thanks
I can't specifically speak from the perspective of a UK investor... but I'm regularly converting my other European currency to USD at Interactive Brokers - you get market price, albeit for a USD 2 fee. If you re-invest quarterly, that works out at 8 USD fees per year. Which is likely to be much lower than 1% (unless you invest < 800 USD equivalent per year). Of course there's some slight drag due to spread in the market, but it's still way better than either 1% fee or higher TER that I'd get with funds purchaseable in my primary currency.

TL;DR: if you're being charged 1% you need to find a different broker. Fast.
I wanted to start with dollar cost averaging and IB charge much custody fees, I don't like that.
That's only the case up to 100k USD in assets. And those fees count towards commissions you might pay (e.g. on currency conversion). Even then, 120 USD is what you'd lose if paying 1% conversion fee on 12k invested in a given year. Or 120 USD is the additional fee you'd be paying if you had 120k invested in an ETF with a 0.1% higher TER than a comparable fund elsewhere.

In the short term, those custody fees might be annoying. As soon as you reach 100k invested, they disappear.

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