LSEETF vs. AEB

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marinero
Posts: 15
Joined: Tue Aug 06, 2019 5:16 am

LSEETF vs. AEB

Post by marinero » Sat Oct 12, 2019 3:15 am

I am looking to setup the following portfolio:
* 10% EMIM: iShares Core MSCI Emerging Markets IMI UCITS ETF (Acc)
* 70% IWDA: iShares Core MSCI World UCITS ETF USD (Acc)
* 20% AGGH: iShares Core Global Aggregate Bond UCITS ETF EUR Hedged (Acc)

I am an EU national, with money in Euro, but currently living in the UK and my base currency on IB is euro too.

I am using interactive brokers.

1. When I search for IWDA or EMIM I get two versions. One that says AEB and one that says LSEETF. Which one am I supposed to buy?
2. Why do they have different prices? IWDA AEB is listed as 53 approx IWDA LSEETF is listed as 58 approx.

glorat
Posts: 301
Joined: Thu Apr 18, 2019 2:17 am

Re: LSEETF vs. AEB

Post by glorat » Sat Oct 12, 2019 3:43 am

The difference is in the trading currency. I believe one is EUR and one is USD. Normally, you'd choose the one with minimal FX cost for your broker but IB has near zero cost so it doesn't matter.

I don't think it matters much either way... I would prefer the USD version since that's how iShares manages the fund and it might be the currency in which dividends are paid regardless of the trading currency (eg VWRL is listed in GBP but pays USD dividends)

TedSwippet
Posts: 2514
Joined: Mon Jun 04, 2007 4:19 pm
Location: UK

Re: LSEETF vs. AEB

Post by TedSwippet » Sat Oct 12, 2019 3:47 am

marinero wrote:
Sat Oct 12, 2019 3:15 am
1. When I search for IWDA or EMIM I get two versions. One that says AEB and one that says LSEETF. Which one am I supposed to buy?
2. Why do they have different prices? IWDA AEB is listed as 53 approx IWDA LSEETF is listed as 58 approx.
AEB is the Euronext exchange in Amsterdam. IWDA trades and is quoted in EUR in Amsterdam, and in USD in London, so when you take USD/EUR forex into account, the prices of these two ETF versions are the same.

Given that you currently hold Euros, I would imagine that buying the Euro-traded one might be more efficient for you. Not an IB customer personally, though.

Edit to add: Also, what glorat said on beating me to it here.
Last edited by TedSwippet on Sat Oct 12, 2019 3:48 am, edited 1 time in total.

Topic Author
marinero
Posts: 15
Joined: Tue Aug 06, 2019 5:16 am

Re: LSEETF vs. AEB

Post by marinero » Sat Oct 12, 2019 3:47 am

You'd prefer the USD version even though my base currency is EUR on IB?

(thanks for your answer)

Schlabba
Posts: 173
Joined: Sat May 11, 2019 9:14 am

Re: LSEETF vs. AEB

Post by Schlabba » Sat Oct 12, 2019 4:02 am

marinero wrote:
Sat Oct 12, 2019 3:47 am
You'd prefer the USD version even though my base currency is EUR on IB?

(thanks for your answer)
For more information:
https://www.bogleheads.org/wiki/Non-US_ ... currencies
IWDA: MSCI World | EMIM: MSCI Emerging Markets | AGGH: Global Aggregate Bond Hedged to €

glorat
Posts: 301
Joined: Thu Apr 18, 2019 2:17 am

Re: LSEETF vs. AEB

Post by glorat » Sat Oct 12, 2019 5:46 am

marinero wrote:
Sat Oct 12, 2019 3:47 am
You'd prefer the USD version even though my base currency is EUR on IB?

(thanks for your answer)
IB famously provides multi currency accounts with fx rates only large institutions can get so your IB base currency makes no difference. It is only used for the reporting.

Read above posted wiki link as to why any differences are very minor.

imperia
Posts: 195
Joined: Tue Feb 21, 2017 6:31 am

Re: LSEETF vs. AEB

Post by imperia » Sat Oct 12, 2019 6:06 am

If you have euros than you should buy IWDA on AEB.
I have euros, I transfer euros to IB and I buy IWDA on AEB.
I do not see point sending euros to IB, convert in USD and buy IWDA on LSE.
If you have GBP, or USD than buy on LSE.

It is same ETF just traded in another currency.
.

DJN
Posts: 518
Joined: Mon Nov 20, 2017 12:30 am

Re: LSEETF vs. AEB

Post by DJN » Sat Oct 12, 2019 6:28 am

Hi,
in regards to some iShares ETFs listed in LSE (including AGGH) its worth reading the following thread: viewtopic.php?f=22&t=290937
DJN
Yah shure

thibaulthib
Posts: 89
Joined: Mon Nov 12, 2018 8:46 am

Re: LSEETF vs. AEB

Post by thibaulthib » Sun Oct 13, 2019 5:27 am

Are you saying that if we are paid in EURO, we better invest in IWDA AEB than converting EURO to USD and invest in IWDA LSE?

What are the pros and cons of each?

imperia
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Re: LSEETF vs. AEB

Post by imperia » Sun Oct 13, 2019 6:10 am

You need to convert euros to usd and pay conversion fees every time. Why do that when you can buy euro version.
If your currency is euro than invest in euro version.

You have no adventages if you invest in USD.
It is same etf, but why do conversion?

thibaulthib
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Re: LSEETF vs. AEB

Post by thibaulthib » Sun Oct 13, 2019 8:18 pm

But is this hedged somehow?

glorat
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Re: LSEETF vs. AEB

Post by glorat » Sun Oct 13, 2019 9:50 pm

thibaulthib wrote:
Sun Oct 13, 2019 8:18 pm
But is this hedged somehow?
No. (The posted wiki above gives a good explanation)
imperia wrote:
Sun Oct 13, 2019 6:10 am
You need to convert euros to usd and pay conversion fees every time. Why do that when you can buy euro version.
If your currency is euro than invest in euro version.

You have no adventages if you invest in USD.
It is same etf, but why do conversion?
I largely agree with this conclusion but just to remind people that even if *you* don't convert your EUR to USD, the ETF will still have to do the conversion for you and pay some conversion fees since the vast majority of the ETF assets will be in USD. So especially for a broker like IB with near zero FX cost, the difference will be minimal.

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BeBH65
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Re: LSEETF vs. AEB

Post by BeBH65 » Mon Oct 14, 2019 2:03 am

This makes me reflect: What are the money flows with ETFs, and who does currency conversions?

ETFs are traded on a stock exchangenin a currency. One is buying from another person on the stock exchange in the trading currency. I do not see a currency conversion here. This is up to 99% of the etf trades.

If there are not "enough" shares of the ETFs, the authorised participants (AP) will "create new ones" bundling shares of the underlying assets. Based on the info that I have seen an AP is involved in 1% (max 5%) of the trades of the shares of the etf. The AP sells those new etf shares on the different exchanges and receive the trading currency: USD, EUR, CHF, GBP. To buy the shares of the underlying assets they need USD, EUR, CHF,GBP.
Depending on the size of each flow the AP will need to convert. This is one of the AP costs.

In addition there are the dividends paid by the underlying assets and either paid out to the investors (distributing funds), or reinvested I additional assets (accumulating fund). My understanding is that this is performed on the fund level, with possible conversions as needed. Similarly, when the constituents of the index change the fund company will trade the underlying assets in the currency of the asset, converting the currency as needed.
BeBH65. (only an investment enthusiast, not a financial adviser, perform your due diligence). | Have a look at https://www.bogleheads.org/wiki/Outline_of_Non-US_domiciles

thibaulthib
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Re: LSEETF vs. AEB

Post by thibaulthib » Mon Oct 14, 2019 5:13 am

Question: I invested 60k euro in IWDA LSE (so USD) in January 2019. I actually converted this 60k from euro to USD back then.

Right now, I have 100% on IWDA USD since I live in Singapore. But i don't know where I will end up so, I'm thinking of having 50% of IWDA in euro too.

Today, the euro/usd is 1.10 vs 1.15-1.20 at the beginning of the year.

Shall I convert 50% of IWDA from USD to EURO then? Or is it a bad idea?

TedSwippet
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Location: UK

Re: LSEETF vs. AEB

Post by TedSwippet » Mon Oct 14, 2019 6:20 am

thibaulthib wrote:
Mon Oct 14, 2019 5:13 am
Today, the euro/usd is 1.10 vs 1.15-1.20 at the beginning of the year. Shall I convert 50% of IWDA from USD to EURO then? Or is it a bad idea?
Switching between IWDA traded in EUR and IWDA traded in USD will make absolutely no difference at all to your investment returns. An ETF's trading and denomination currencies are broadly irrelevant to you. See this wiki page for why:

Non-US investors and ETF currencies - Bogleheads

thibaulthib
Posts: 89
Joined: Mon Nov 12, 2018 8:46 am

Re: LSEETF vs. AEB

Post by thibaulthib » Mon Oct 14, 2019 8:39 am

Would it make sense if I'm living and working in Europe, since my currency would be Euro for both salary and what I spend on a daily basis, i.e. my home currency ?

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BeBH65
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Re: LSEETF vs. AEB

Post by BeBH65 » Mon Oct 14, 2019 8:48 am

Currency conversion cost you.
If you earn and spend in euro, you can avoid the currency conversion charges by investing in a fund trading in euro.

((The trading currency is not related to the currency risk that you have linked to the currency of the underlying asset))
BeBH65. (only an investment enthusiast, not a financial adviser, perform your due diligence). | Have a look at https://www.bogleheads.org/wiki/Outline_of_Non-US_domiciles

glorat
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Re: LSEETF vs. AEB

Post by glorat » Mon Oct 14, 2019 9:47 pm

thibaulthib wrote:
Mon Oct 14, 2019 8:39 am
since my currency would be Euro for both salary and what I spend on a daily basis, i.e. my home currency ?
People are trying to explain that it makes no difference. To make a simple analogy, it is like this...

You earn and spend in EUR.

You want to buy some AAPL (the largest component of most ETFs). You can either
1) Give your EUR to a broker, who will convert it to USD and use that to buy some AAPL
2) Convert EUR to USD yourself, give it to the broker who will buy some AAPL
At the end of the day, you own some AAPL

Whether your earnings or future spendings were in EUR makes no difference to the resulting effect of 1) and 2). The only miniscule difference is which option is more efficient for the FX commissions. Usually 1). But if you're on IB, the difference will be less than 0.01%

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