Just for fun of discussion, I thought I would share this interesting article in the FT yesterday. I have always invested in VUSA and IUSA, but these are losing popularity as there are alternatives with better tax treatment for European investors.
Apparently the physically replicated S&P 500 ETFs like VUSA and IUSA have been losing investors as people switch to synthetic ETFs based on swaps.
"BlackRock’s shift accompanies a widening belief that synthetic ETFs are a better structure for US equity ETFs aimed at European investors than “physical” ETFs, which actually hold the underlying shares.
Physical US equity ETFs domiciled in Luxembourg and Ireland, the two main European hubs, face withholding tax of 30 per cent and 15 per cent respectively on the dividend income they receive from their holdings. Synthetic ETFs can escape this tax, potentially giving them a performance advantage, prompting investors to increasingly switch to the swap-based model.
This trend accelerated in the third quarter, with BlackRock’s $50bn iShares Core S&P 500 ETF — the fund it has launched a synthetic version of — seeing the largest net outflows of any equity ETF in Europe, according to data from Morningstar, leaking €1.1bn. Vanguard’s S&P 500 ETF, another physical equity ETF, was hit by the same trend, shipping €560m."
Invesco SPXP is a swap based S&P500 tracker that is available on the Trading 212 platform and indeed we can see that it does outperform IUSA and VUSA. What do others think?
