Trying to understand the impact of currency costs for a fund denominated in USD vs GBP?

EdSwippet

isayhello said:

Hmm but in a situation with even with a GBP version of a fund that say invests in the s and p 500, are the underlying investments not bought in dollars and still incurring the forex charge?

A fund manager or exchange will net out sales and purchases, so that the underlying assets that the fund has effectively move from one holder to another without any need for actual translation into cash for either. For example, if you buy one unit (or ETF share) of something that holds US stocks with GBP, and simultaneously I sell one for GBP, the money you pay can pass to me without any forex drag for either of us. For a sizeable fund or ETF, most trades would probably be like this; neither unit creation nor unit destruction.

Beyond that, a fund manager may use currency swaps, securities lending, futures, and a heap of other things under the covers to ensure that the fund tracks the relevant index, yet all without incurring anything like the forex cost you and I would have to pay at the UK platform level.