FTSE All-World ex-US Tracker GBP?

DairyQueen

Could anyone advise of an ETF/Fund, denominated in GBP, which tracks the FTSE All-World ex-US Index?

Background:

I wish to diversify my portfolio by investing more in global equities but wish to keep the US element discrete from the rest. Reasons for this:
a) The US market constitutes such a large percentage of the global market that US shares constitute a min of 50% of most global trackers.
b) The US market is at all-time highs and I wish to time my next investment into the US market separately from the rest.
c) I wish to monitor my US investment without the need to trawl through the composite of any global fund/ETF in which I am invested.

I have found a couple of ETFs (Vanguard and ishare) which will do the job but both are denominated in USD and I would rather avoid the currency risk if at all poss.

Any suggestions gratefully received.

EdSwippet

DairyQueen wrote: »

I have found a couple of ETFs (Vanguard and ishare) which will do the job but both are denominated in USD and I would rather avoid the currency risk if at all poss.

The denomination currency of the ETF doesn't add any currency risk that isn't already there from investing in non-UK markets. From an example provided in this article:

Note that it's the currency in which the underlying assets are ultimately priced that determines your currency risk.
Let's say you're a UK investor who buys an ETF listed on a European exchange valued in Euros that tracks the Japanese Nikkei index.
The exchange rate that determines your currency risk is the pound versus the Yen, not the pound versus the Euro or the Euro versus the Yen.

In your case, you would be buying an ETF denominated in USD but which holds a basket of non-USD assets. In that case, your exchange rate risk remains that between the GBP and whatever currencies these non-USD assets are based in. And no different(*) to if you had bought an ETF priced in GBP.

(*) Except for the requirement to exchange into USD to buy, and back again on selling. These two transitions do add extra forex cost drag at the buy and sell ends of the deal. No added forex rate exposure, though.

A_T

If you want GBP funds then you may have to go with 4: European, Japan, Asia/Pacific, Emerging Markets.

Why do you think you're in a position to time investment in US stocks in a way that will be beneficial?

DairyQueen

I don't.

I don't usually try to time markets but even an amateur like me thinks twice about buying into a market at all time highs, and which is priced on the assumption of Trump's election hype becoming a long-term reality.

I would rather drip-feed into the US but have a lump-sum available to invest in 'the rest'.

DairyQueen

Thank you. That's really helpful info.

darkidoe

Ah ha!

This is one of the reasons I opted to build my own world tracker portfolio with the various Vanguard regional ETFs

Picking from:
USA
Japan
Asia/Pacific
Europe
Emerging Markets

I can then set the percentage allocation of the portfolio as I desire. I think the key mentality is not to time which market to invest in at a particular time but to fix the allocation right at the beginning of building your portfolio and then when there are imbalances, to rebalance the allocation back to its original allocation. That way you are taking advantage of the volatility of the markets to get better value ever so slightly.

And I get to do some homework to work out how each region does relatively to each other and perhaps learn something out of it. But looking at the graphs, it seems that the global economy is pretty much interwined and correlated anyhow.

A_T

An all world tracker like VWRL or HMWO will rebalance itself.

grey_gym_sock

DairyQueen wrote: »

I don't usually try to time markets but even an amateur like me thinks twice about buying into a market at all time highs, and which is priced on the assumption of Trump's election hype becoming a long-term reality.

i have to say: i think you're far too confident about the US stock market being too high. it's not nearly that obvious that it is. maybe it isn't too high at all. i really don't know.

all-time highs are not a good reason to avoid a market. most of the time, markets rise; occasionally, they fall (and falls tend to be more sudden than rises); and in the long term, taking all the rises and falls together, they tend to rise a lot overall. the effect is that markets tend to spend a large part of the time at or near their historical all-time high. and usually, the next thing they do is rise further.

if you're holding shares, you absolutely must be prepared for the possibility of big falls (and prepared to keep holding, for the eventual recovery). but it's not obvious when they'll come.

as for trump, he's a disaster in many ways, but the stock market doesn't have that much to do with him. (nor with governments in general.)

e.g. ramping up hatred and deportations of immigrants is dreadful for immigrants, but it isn't going to lead to higher wages, because wage level are all about the relative power between employer and employees, and about employers having option to use offshore labour. trump is entirely in favour of low wages and employer power, as you can see from how his own companies are run.

so don't be so sure that the US market is too high. but if you want to allocate it a lower percentage than its market cap (of over 50% of world markets), that's fair enough. allocate some lower percentage, and then stick to it. picking an allocation you can stick to is much better than picking 1 you won't be able to stick to. and the fact is that nobody knows which allocation will turn out best.

I would rather drip-feed into the US but have a lump-sum available to invest in 'the rest'.

i wouldn't do that (unless you mean drip feed over no more than the next 12 months). the danger is that you'll keep putting off putting a sensible amount in the US for too long. i'd just allocate a lower percentage to the US and then stick to it.

currency exposure has already been covered. you are generally best off buying ETFs which are traded in GBP (or, if they're traded in more than 1 currency, buying the line which is traded in GBP) to avoid currency conversion costs on purchase and sale. these costs can be quite big, depending on which broker you are using.

Thrugelmir

DairyQueen wrote: »

a) The US market constitutes such a large percentage of the global market that US shares constitute a min of 50% of most global trackers.

Don't buy a tracker. Opt for a global income trust. This will reduce the US weighting in the fund.

DairyQueen

I definitely need to invest more in the US but I am suspicious of the drivers supporting the current highs. I believe that every bit of optimism has been rung-out of the US market since Trump was elected. I'm no expert but investing a lump sum now doesn't feel 'right' and I would rather miss out on some gains than have a niggly feeling of unease. Last time I felt like this was was about 6/12 months before the dot.com crash post 2000. I sold out prior to the crash and missed some gains but still banked good profits (and I slept well at night).

I am neither greedy nor a high-risk investor. Moderation is the approach that suits me best. I don't feel comfy investing a single lump sum in the US market right now. I am 8 years from retirement and this will therefore be a relatively short-term investment. I think I will buy into the US market in tranches over the next year or so.

Sally57

Thrugelmir wrote: »

Don't buy a tracker. Opt for a global income trust. This will reduce the US weighting in the fund.

Which global income trust would be appropriate?