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Hedged ETFs performance reconciliation
seppel05
Posts: 2 Newbie
Hi guys,
I am currently trying to understand how hedged ETFs track against their unhedged equivalents if comparing them in a synthetic way.
As an example, I am looking at CRHG (iShares Global Corporate Bond UCITS ETF GBP Hedged (Dist)). This has ~55% US exposure, ~25% Europe (incl UK) and ~15% other geographies. As proxies for US and Europe I am looking at LQDS (iShares USD Corporate Bond UCITS ETF (Dist)) for US and IEAA (iShares Core Euro Corporate Bond UCITS ETF (Acc)) for Europe.
LQDS did 8.2% over the last year (in USD, assuming no reinvestment) while IEAA did -0.78% (in EUR, including reinvestment). This compares to 2.0% of performance for CRHG.
At a weighting of 55% US / 25% Europe I get to 4.3% as synthetic performance (assuming the 15% Other did 0%) which is significantly more than the 2.0%.
Can anyone help me understand how this links together? I am aware that this includes some grossly simplifying assumptions (e.g. risk of wrong reference ETFs, ignoring the 15% Other allocation) but directionally it should be there. What am I missing?
Thanks in advance!
I am currently trying to understand how hedged ETFs track against their unhedged equivalents if comparing them in a synthetic way.
As an example, I am looking at CRHG (iShares Global Corporate Bond UCITS ETF GBP Hedged (Dist)). This has ~55% US exposure, ~25% Europe (incl UK) and ~15% other geographies. As proxies for US and Europe I am looking at LQDS (iShares USD Corporate Bond UCITS ETF (Dist)) for US and IEAA (iShares Core Euro Corporate Bond UCITS ETF (Acc)) for Europe.
LQDS did 8.2% over the last year (in USD, assuming no reinvestment) while IEAA did -0.78% (in EUR, including reinvestment). This compares to 2.0% of performance for CRHG.
At a weighting of 55% US / 25% Europe I get to 4.3% as synthetic performance (assuming the 15% Other did 0%) which is significantly more than the 2.0%.
Can anyone help me understand how this links together? I am aware that this includes some grossly simplifying assumptions (e.g. risk of wrong reference ETFs, ignoring the 15% Other allocation) but directionally it should be there. What am I missing?
Thanks in advance!
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