UK UCITS ETF replicating a US EFT

For investors outside the US. Personal investments, personal finance, investing news and theory.
Sister forums: Canada, Spain (en español)
---------------
Post Reply
Topic Author
itsreallyunique
Posts: 14
Joined: Thu Jan 27, 2022 4:14 am

UK UCITS ETF replicating a US EFT

Post by itsreallyunique »

Please be kind and don't roast me :happy with what may seem a really simple question to most of you...

Totally understand how US ETF's work and that in most cases in the UK there is usually a UCITS equivalent & that there is a GBP & a USD version.

Just moved to the UK and previously bought EFT's directly on the NASDAQ from South Africa, going to be using a local UK domiciled investment platform.

What I am trying to understand is how the UK equivalent replicates the US, I will use QQQ as an example...

So EQQQ today (@the moment) is down -.88%, yet the price at the moment is 25,966 on the opening price 25,544 which means it has increased so how is that a decline? Even the graph is tracking up like it is a gain

Also in terms of replicating the US EFT is that post what occurred the day before or an indication of what will happen when the US market opens later in the day?? I know EQQQ is listed on the UK exchange

It almost seems like it is a FUTURE

TIA
User avatar
oldcomputerguy
Moderator
Posts: 17934
Joined: Sun Nov 22, 2015 5:50 am
Location: Tennessee

Re: UK UCITS ETF replicating a US EFT

Post by oldcomputerguy »

This topic is now in the Non-US Investing forum.
There is only one success - to be able to spend your life in your own way. (Christopher Morley)
TedSwippet
Posts: 5181
Joined: Mon Jun 04, 2007 4:19 pm
Location: UK

Re: UK UCITS ETF replicating a US EFT

Post by TedSwippet »

Welcome.
itsreallyunique wrote: Thu Jan 27, 2022 4:25 am So EQQQ today (@the moment) is down -.88%, yet the price at the moment is 25,966 on the opening price 25,544 which means it has increased so how is that a decline? Even the graph is tracking up like it is a gain
It's not clear what data source you're looking at, but the main thing I think you're looking to unravel is how an ETF can arrive at an intra-day NAV when the markets in which the things it holds trade are closed.

This article from Wisdom Tree offers some details:

Intra-day pricing: How ETF shares are priced
itsreallyunique wrote: Thu Jan 27, 2022 4:25 am Also in terms of replicating the US EFT is that post what occurred the day before or an indication of what will happen when the US market opens later in the day?? I know EQQQ is listed on the UK exchange
Maybe it would help to look at a comparison of QQQ and EQQQ over a short period. For example, this:

https://www.google.com/finance/quote/EQ ... &window=5D

If you look closely, you can see that although the lines for QQQ and EQQQ are discontinuous, you could stitch them together so that they form a single more-or-less continuous line. And if you zoom out, you will see that their ups and downs track pretty closely (they do diverge over the longer term because of forex differences; one is listed and displayed in EUR, and the other in USD).
Topic Author
itsreallyunique
Posts: 14
Joined: Thu Jan 27, 2022 4:14 am

Re: UK UCITS ETF replicating a US EFT

Post by itsreallyunique »

Thank you that was very helpful.

Just back to your reply on…

“ If you look closely, you can see that although the lines for QQQ and EQQQ are discontinuous, you could stitch them together so that they form a single more-or-less continuous line. And if you zoom out, you will see that their ups and downs track pretty closely (they do diverge over the longer term because of forex differences; one is listed and displayed in EUR, and the other in USD).”

In terms of the Google URL if I compare them @ 6M EQQQ is .36% up yet QQQ is down -6.88%, both are listed in the currency they trade so it should not be FX differences, if they are replicating / tracking why such a % return difference?
TedSwippet
Posts: 5181
Joined: Mon Jun 04, 2007 4:19 pm
Location: UK

Re: UK UCITS ETF replicating a US EFT

Post by TedSwippet »

itsreallyunique wrote: Thu Jan 27, 2022 2:21 pm In terms of the Google URL if I compare them @ 6M EQQQ is .36% up yet QQQ is down -6.88%, both are listed in the currency they trade so it should not be FX differences, if they are replicating / tracking why such a % return difference?
It is forex difference. Imagine an ETF that holds only actual USD cash, a literal stack of $100 notes. If you charted its USD version you would see a flat line, but if you charted its EUR version you would see the USD/EUR exchange rate. On any asset, the (unhedged) return you get is the asset return multiplied by the forex change between your currency and the home currency of the assets.

Today's EUR/USD chart on Google finance shows -6.05% over six months:

https://www.google.com/finance/quote/EU ... &window=6M

Any other differences will be due to differing TERs, tracking error, and potentially stale pricing (where you are looking at the live price of one ETF but the most recent, but old, closing price of the other; it hasn't yet traded at an updated price).

If you want a fund or ETF that factors out forex, you need to look for something that is currency hedged. For example, EQGB or EQEU:

https://www.google.com/finance/quote/QQ ... FRA%3AEQEU
Topic Author
itsreallyunique
Posts: 14
Joined: Thu Jan 27, 2022 4:14 am

Re: UK UCITS ETF replicating a US EFT

Post by itsreallyunique »

Thanks, that 6M view in Google Finance set my mind @ ease.

I guess I have been struggling with how each variant of QQQ does daily which does not match up as you can see from the image which is the daily movement in the Apple stocks app.

Am I correct in saying seeing as that it all mostly replicates over time if I just want to see the actual daily performance of QQQ excluding FX movements it is best just to track the NASDAQ QQQ?

Thanks once again you have been extremely helpful.

Image
Valuethinker
Posts: 49035
Joined: Fri May 11, 2007 11:07 am

Re: UK UCITS ETF replicating a US EFT

Post by Valuethinker »

itsreallyunique wrote: Thu Jan 27, 2022 4:25 am Please be kind and don't roast me :happy with what may seem a really simple question to most of you...

Totally understand how US ETF's work and that in most cases in the UK there is usually a UCITS equivalent & that there is a GBP & a USD version.

Just moved to the UK and previously bought EFT's directly on the NASDAQ from South Africa, going to be using a local UK domiciled investment platform.

What I am trying to understand is how the UK equivalent replicates the US, I will use QQQ as an example...

So EQQQ today (@the moment) is down -.88%, yet the price at the moment is 25,966 on the opening price 25,544 which means it has increased so how is that a decline? Even the graph is tracking up like it is a gain

Also in terms of replicating the US EFT is that post what occurred the day before or an indication of what will happen when the US market opens later in the day?? I know EQQQ is listed on the UK exchange

It almost seems like it is a FUTURE

TIA
If the fund is not a Reporting fund - HMRC has a list of those funds - then you will have a mess of a tax problem (all gains are treated as income, and potentially (?) the whole amount when you redeem is treated as income). This is the big problem with non EU domiciled funds (including UK in EU).

It's better to use UCITS funds.

Also no EU broker (UK included in this) will sell you a US listed ETF or fund, because of rules regarding consumer protections (unless you get classified as an expert investor). You can hold them in the account, but you cannot buy new units.
Valuethinker
Posts: 49035
Joined: Fri May 11, 2007 11:07 am

Re: UK UCITS ETF replicating a US EFT

Post by Valuethinker »

itsreallyunique wrote: Fri Jan 28, 2022 3:42 am Thanks, that 6M view in Google Finance set my mind @ ease.

I guess I have been struggling with how each variant of QQQ does daily which does not match up as you can see from the image which is the daily movement in the Apple stocks app.

Am I correct in saying seeing as that it all mostly replicates over time if I just want to see the actual daily performance of QQQ excluding FX movements it is best just to track the NASDAQ QQQ?

Thanks once again you have been extremely helpful.

Image
If you want to know how your fund has done track your fund price. In USD if you want to strip out currency movements.

In actual fact the performance of an index is only theoretical to you, it's how your money has done that matters.

You can also check the Nasdaq online at any given moment -- various finance sites.

In actual fact, best practice in investing is to set a good initial investment policy, and then check on actual market levels very infrequently. I made better decisions with things I just bought, and have held on to, than I do checking markets every day.
Post Reply