Have Euro stocks thru US-based EFT's but weakening USD having impact

Paddysan

I have invested in europe via USD ETF's for all the good reasons already discussed. Have some concern about currency fluctuations i.e. think USD will weaken further against the Euro. (Investing from Ireland in Euro to USD ETF buying Euro shares)
I have investigated hedged etf's but seems like only really protect against strong USD and at end of day I will be converting from USD to Euro in any event. (my understanding, open to contradiction here..)
Don't really want to get into buying currency hedging etc..
So my question here is where can I go to invest in European ETF's that don't fall under the senseless Irish tax policy and which are not US-based. Have looked at Switzerland but most seem to be under UCIT, not sure if want to invest via Yen, need to do some currency research, Canada?
Any other ideas or is there other option?

wordofwarning

It does not make a difference that you are buying USD ETFs. The currency fluctuation is taken into the price of the ETF, as if there is an arbitrage opportunity on massively traded ETFs, it is rarely there in the long term.

If you buy a USD ETF, it is just the EUR value translated into USD.

Paddysan

Thanks, but I've found the currency volatility (EUR-USD in buy and then USD-EUR in sell) is having a greater effect (for good and bad) than the share price movement.
So would like to avoid that as much as possible but also avoid the tax treatment for euro-based EFT's.

daheff

Are you sure its not a combination of fx spread and accrued mgmt fee in the sale price?

Paddysan

Not really as through Degiro and both fx spread and mgmt charges not significant. Think value in Euro stocks but frustrating have to buy in USD because of Irish tax treatment.
I'm trading some EFT's in short term so can't ignore currency with long term view.
Any ideas?

wordofwarning

Paddysan wrote: »

Thanks, but I've found the currency volatility (EUR-USD in buy and then USD-EUR in sell) is having a greater effect (for good and bad) than the share price movement.
So would like to avoid that as much as possible but also avoid the tax treatment for euro-based EFT's.

I don't think you fully understand what you are attempting to do or misunderstand it. You want to buy hedged products to protect yourself from FX changes. As previously mentioned by myself, hedged rarely work perfectly. You are better buying an unhedged product, as any mismatching between the underlying asset price and market price is eroded away by computers constantly trying to find mismatches in asset values.

What ETF are you buying? The Vanguard FTSE Europe ETF is never really trading a premium or discount. It is always trading at the NAV. Vanguard tend to quickly eliminate spread when their ETF at not close to NAV. The FTSE Europe ETF difference between NAV and market price is 0.02c on $58.29 stock.

The FX fluctuations on a Eurostoxx index are irrelevant, as arbitrators will eliminate the potential arbitrage on the products

Paddysan

VGK, IEUR and some LIT

for example (nums simplified for illustration)
bought VGK at 46 per share at 1.18 Eur/USD
sold at 48 at 1.16

so up on share price and down on currency once sold and converted back to Euro through Degiro.

I want to make some short term trades as well as L/T in EFT's and have reasonable confidence in Euro region for next year so that's where the bulk of my investment is planned.
But if want to invest in Euro EFT's to avail of CGT relief need to buy Euro EFT in US in USD and then when I sell like above am exposed to the FX change. I wanted to take out the FX variable out of the equation. I would maintain the hedged versions of those EFT's are not worth the additional mgmt fee but happy to be contradicted.

Ideally I would like to buy Euro EFT's using Euro and eliminate the FX completely so even in short term not a variable need to concern with, is daft forced to go invest in another currency to invest in where I work..

ct5amr2ig1nfhp

Question for you Paddysan - how are you getting CGT relief on Euro ETFs? Is it not based on where the ETF is domiciled? So whether you buy in EUR or USD it doesn't matter?

Paddysan

Hayley Flaky Penniless wrote: »

Question for you Paddysan - how are you getting CGT relief on Euro ETFs? Is it not based on where the ETF is domiciled? So whether you buy in EUR or USD it doesn't matter?

EFT's quoted above in are US Domiciled EFT's investing in Euro shares, e.g.VGK is US9220428745 so can avail of CGT relief.