Do (Non UK Stocks) Income/Distributing Funds/ETFs pay dividends in GBP?

bowlhead99

newbinvestor wrote: »

True, I am obsessive about the fees.
That ETF is traded in GBP but the base currency is USD. It doesn't really matter as it's accumulating though so no dividend payouts = no platform currency charge.

You'll generally find the base accounting and reporting currency of a fund that invests 100% in US assets (e.g. S&P500 tracker) will be USD. Likewise a fund that strictly follows a well-known global market index (eg. FTSE All-World or MSCI AWCI) will be USD as well, because those indices are primarily published in USD.

The way for periodic payments to you, to definitely escape currency conversion, is to make sure there aren't any, or that they are small. So a fund that has a low yield or that accumulates its yield, would be helpful, although you can't engineer a really low natural yield without compromising your investment choices.

There are some funds with dedicated currency classes (for example GSPX is the iShares S&P500 hedged to GBP) which can give you a GBP price and GBP income from your US asset. However, that wouldn't give you the full underlying return of the US index (only a hedged version of it, which could easily be tens of percent better or worse for a sterling investor) and hedging obviously has a cost, which you wouldn't want.

Here's what Fidelity say (which I'm annoyed about as it's too vague/no numbers):
e) If income from an Investment is payable inacurrency other than
sterling, we may ask the issuer or its agent to convert the income
into sterling at such exchange rate as they make available to
us. Alternatively, we may convert the income into sterling at such
exchange rate as we or another Fidelity group company obtain from
a bank or other market counterparty. Any costs or charges imposed
by the relevant third party will be passed on to you.

Well, for the purpose of a policy note or T&C, they're not going to be able to tell you the exchange rates before they are known - if the option exists for some investments to send them sterling where possible, but some investments don't accommodate that and Fidelity has to arrange the conversion itself, and doesn't yet know the amounts involved and whether a good rate will be obtained from a market counterparty on that amount ($50 no doubt achieving a less competitive rate than $5 million), they are going to need to be vague, by necessity.

For different deal sizes, different currencies will have different spreads around the mid market rate, and if they were to give you a catch-all that they do not expect it to be worse than 200bps (to make sure that they were always within that range, even though they had no expectation of it being that bad), you would say, 'bloody hell, I'm not paying 2%'