Whats the difference in these funds please

LULULU1

Hi all,

Can anybody please tell me the difference between iShares Core MSCI World UCITS ETF USD (Acc) and the iShares Core MSCI World ETF USD Acc GBP.

Also I noticed there is a 3% switching fee with the USD one. What does that mean.

Many thanks for any help.

Glen_Clark

LULULU1 wrote: »

Hi all,

Can anybody please tell me the difference between iShares Core MSCI World UCITS ETF USD (Acc) and the iShares Core MSCI World ETF USD Acc GBP.

Also I noticed there is a 3% switching fee with the USD one. What does that mean.

Many thanks for any help.

One is priced in dollars the other in pounds.

The pounds one ticker code SWDA is my biggest holding (55%)
https://markets.ft.com/data/etfs/tearsheet/summary?s=SWDA:LSE:GBX
Fees are 0.2%.

HMWO is cheaper at 0.15%,
https://markets.ft.com/data/etfs/tearsheet/summary?s=HMWO:LSE:GBX

but I chose SWDA because its an accumulator, avoiding reinvestment fees.

LULULU1

Thank you,

Regarding the 2 I have mentioned in terms of profit which would be better. How does the weaker pound against the dollar effect which is the best one to hold.

lpgm

Most people wouldn't want to buy a fund priced in dollars because they would, in effect, have to buy dollars first - is that the 3% switching fee?

LULULU1

No idea. Didn't understand the switching fee at all. Still no idea which one is better.

EdSwippet

LULULU1 wrote: »

How does the weaker pound against the dollar effect which is the best one to hold.

The short answer is that for ETFs that do not use currency hedging, it doesn't. This article explains things fairly well.

Unless you already hold USD in a multi-currency brokerage account, buying the USD denominated variant of this ETF would simply add a completely avoidable deadweight forex cost to each trade. (And apparently a murky 'switching fee' too -- or maybe instead, shrug.)

LULULU1

Thank you .

So which of the ones at the top would it be better to invest in ?

Alexland

Assuming you are in the UK then SWDA as you can buy it in pounds without converting your money first which would probably cost more than the tiny difference in fees. It's also accumulating so you don't need to pay fees to reinvest income which may be a benefit for you.

bowlhead99

LULULU1 wrote: »

No idea. Didn't understand the switching fee at all.

Well, you are the one telling us that there is a switching fee with one of them. So you have read that somewhere, or been told that, and it's you rather than us that's best placed to tell us what they mean by a switching fee. Presumably whoever published the information or told it to you will have defined it.

The poster above speculated that it means you have to pay a fee to switch the pound sterling you have in your account, into the US dollars which you will need to buy that particular ETF on the stock exchange. "iShares Core MSCI World UCITS ETF USD (Acc)" is priced in US dollars and so if you don't run your account in dollars, you will incur fees/commissions to get the dollars to buy the ETF. And when you eventually sell the ETF and get dollars for it, you'll incur fees to get sterling back.

That sounds logical to me, although 3% is high and many of the popular brokers would be more like 1-1.5% to do a one-way currency exchange from GBP to USD or USD to GBP. So perhaps 3% is the total estimated fee for the whole 'round trip' to switch the currency from GBP to USD and then from USD to GBP later.

Maybe it means something else entirely but we are not going to be able to confirm it for you because we don't know where you read it or who told it to you.

Still no idea which one is better.

Assuming one of them "iShares Core MSCI World UCITS ETF USD (Acc)" requires you to buy dollars for a fee, because it's priced in dollars, and later sell dollars for a fee, in order to get your pounds sterling back... then that will be worse for you, than buying the other one "iShares Core MSCI World UCITS ETF USD (Acc) GBP" which is a pounds-sterling-priced version of the exact same thing . Because if you buy the one that is priced in pounds, using your pounds, you won't incur a fee to exchange your currencies because you don't need to exchange the currencies.

So the iShares World (Acc) which trades as "IWDA" on the stock exchange and has a dollar price is going to be more costly to buy and sell - giving you a worse overall profit - than the pounds Sterling version which trades as "SWDA" and doesn't cost you any extra fees to buy or sell because it's a normal GBP priced share.

Regarding the 2 I have mentioned in terms of profit which would be better.

The one you can buy and sell in pounds sterling is better because pound sterling is what you have. If you buy the ones priced in US dollars or Euro you will incur extra fees or commissions to change your money both directions, and get a worse result.

How does the weaker pound against the dollar effect which is the best one to hold.

It doesn't really affect things because whichever one you buy, the companies which make up the MSCI World Index are the exact same. So your money will still be exposed to the performance of Apple who make dollars and Sony who make Yen and Samsung who make Won and BMW who make Euros and Nestle who make Swiss Francs. Of course, all of those companies make profits in lots of countries world wide selling in all kinds of different currencies anyway.

So whether your fund is *priced in* dollars or euros or pounds, it doesn't affect what it owns and what profit you will make. The way they publish the prices is just a way of keeping score.

If pounds weaken against other global currencies, then a small performance by the underlying global companies might turn into a large performance of the GBP-priced version of the fund. While ay the same time, a small performance by the underlying global companies might only show as a small performance of the USD-priced version of the fund, but then when you sell the dollars and get pounds, it will still be a large performance.

So the future direction of sterling doesn't really matter if you have already decided that either way (GBP-priced fund or USD-priced fund or Euro priced fund) you are going to buy all the companies in the developed world, based on their size. The result will be what it will be: the same - because you are buying the same underlying companies no matter which of the two versions of the fund you choose to buy.

LULULU1 wrote: »

So which of the ones at the top would it be better to invest in ?

The difference is that if you choose to buy a version priced on the stock exchange in US dollars or Euros, you'll incur some sort of cost from your broker when they change the currencies for you, while if you buy one priced in pounds, with your pounds, you won't incur that expense.

EdSwippet

Alexland wrote: »

Assuming you are in the UK then SWDA as you can buy it in pounds without converting your money first which would probably cost more than the tiny difference in fees.

I think you are conflating two comparisons into one here. IWDA (USD) and SWDA (GBP) are two facets of the same ETF, IE00B4L5Y983, 0.2% TER, accumulating. HMWO (GBP) has a 0.15% TER but is not accumulating.

So, unless already holding and trading in USD, avoid IWDA. Then choose between SWDA and HMWO based on whether the added costs of reinvesting dividends is lower or higher than the 0.05% fee difference.

One other thought. As a general rule I would probably avoid holding accumulating ETFs or funds outside of a SIPP or ISA unless there was a very good reason to do so. The CGT calculations for accumulating funds can quickly become rather tortuous, but are a non-issue within tax-free or tax-deferred wrappers.

Alexland

EdSwippet wrote: »

I think you are conflating two comparisons into one here. IWDA (USD) and SWDA (GBP) are two facets of the same ETF, IE00B4L5Y983, 0.2% TER, accumulating. HMWO (GBP) has a 0.15% TER but is not accumulating.

Sorry yes 'Briano' - the complexity of discussing 3 similar funds in 1 thread!

Alex