US index ETF or Fund that doesn't carry a currency risk

[shopper150]

Is there a way of investing in a US market ETF or Fund that doesn't expose you to the underlying currency risk.
Are any of them 'auto hedged', if that's the right terminology.

[Simpo Two]

If it was that easy then all non-GBP investments should have an 'Auto-hedge' check box...

If not how about keeping a USD account and only convert to GBP when the rate is suitable? A kind of two-level investment if you like - but you control both levels.

[vulture1]

XRSG xtrackers Russel 2000. Thats what i'm in

[BobToc]

Also IGUS

[LeoSayer]

Even a currency hedged funds won't completely remove currency risk.

Most funds only adjust the hedge periodically and you're still exposed to the currency risk with each underlying company held in the fund.

Can I ask why you want to hedge? I've never seen evidence that it produces better returns and hedged versions can have slightly higher fees.

[BobToc]

Quarterly adjustments work tolerably well. I think the hedging rationale is relatively straightforward if you believe the bulk of your future liabilities are sterling denominated.

[BlackG7R]

Is currency risk really worth worrying about, especially over the long term ?

I've heard both Terry Smith and Nick Train say that they don't really give it any consideration at all.

[vulture1]

BlackG7R said:

Is currency risk really worth worrying about, especially over the long term ?

I've heard both Terry Smith and Nick Train say that they don't really give it any consideration at all.

Im down £90 of procter and gamble £60 of which is fx. It was something I hadnt considered.

[anonymous-user]

BlackG7R said:

Is currency risk really worth worrying about, especially over the long term ?

^^^ This. In the greater scheme of things I'm not convinced it's worth worrying about at all.

For instance: Invest in FTSE companies listed in UK with international businesses; pound goes down, foreign profits buy more pounds to distribute to UK shareholders. And vice versa. Overall: not material.

[shopper150]

rockin said:

BlackG7R said:

Is currency risk really worth worrying about, especially over the long term ?

^^^ This. In the greater scheme of things I'm not convinced it's worth worrying about at all.

For instance: Invest in FTSE companies listed in UK with international businesses; pound goes down, foreign profits buy more pounds to distribute to UK shareholders. And vice versa. Overall: not material.

I don't see how you can ignore the currency risk.

I want to invest in US equities because their performance has outstripped UK equities by a country mile, and I do not see that changing. However, I also want to be protected against the currency risk GBP/USD.

If I invest in an unhedged ETF today, with the exchange rate at around 1.40, and in 10 or 20 years time the exchange rate is 2 dollars to the pound, that's quite a sizeable difference. I realise that I could settle in USD and then convert back when the rate is more favourable, but if I need the case then waiting around (possibly years) isn't really an option. So I'm looking to see if hedged funds are available, and it looks like there are some, as members have mentioned above.

See chart below comparing the SP500 against FTSE 250

Edited by shopper150 on Thursday 11th March 12:59

[shopper150]

BlackG7R said:

Is currency risk really worth worrying about, especially over the long term ?

I've heard both Terry Smith and Nick Train say that they don't really give it any consideration at all.

I don't understand this viewpoint, please can you explain? Over the last 10-20 years, I recall the exchange rate ranging from 1.2 to 2 dollars to the pound.

10 year graph below.

[shopper150]

Simpo Two said:

If it was that easy then all non-GBP investments should have an 'Auto-hedge' check box...

If not how about keeping a USD account and only convert to GBP when the rate is suitable? A kind of two-level investment if you like - but you control both levels.

Because I could be waiting years for the suitable rate.

[vulture1]

shopper150 said:

rockin said:

BlackG7R said:

Is currency risk really worth worrying about, especially over the long term ?

^^^ This. In the greater scheme of things I'm not convinced it's worth worrying about at all.

For instance: Invest in FTSE companies listed in UK with international businesses; pound goes down, foreign profits buy more pounds to distribute to UK shareholders. And vice versa. Overall: not material.

I don't see how you can ignore the currency risk.

I want to invest in US equities because their performance has outstripped UK equities by a country mile, and I do not see that changing. However, I also want to be protected against the currency risk GBP/USD.

If I invest in an unhedged ETF today, with the exchange rate at around 1.40, and in 10 or 20 years time the exchange rate is 2 dollars to the pound, that's quite a sizeable difference. I realise that I could settle in USD and then convert back when the rate is more favourable, but if I need the case then waiting around (possibly years) isn't really an option. So I'm looking to see if hedged funds are available, and it looks like there are some, as members have mentioned above.

See chart below comparing the SP500 against FTSE 250

Edited by shopper150 on Thursday 11th March 12:59

If the US did so well compared to the UK stocks there would be a higher demand for the US currency to buy said stocks keeping the rate in your favour?

[anonymous-user]

shopper150 said:

I want to invest in US equities because their performance has outstripped UK equities by a country mile, and I do not see that changing.

Which begs a couple of questions,
Why were you not in US equities previously?
Why do you think US equities will continue to outperform UK?

[xeny]

shopper150 said:

If I invest in an unhedged ETF today, with the exchange rate at around 1.40, and in 10 or 20 years time the exchange rate is 2 dollars to the pound, that's quite a sizeable difference. I realise that I could settle in USD and then convert back when the rate is more favourable, but if I need the case then waiting around (possibly years) isn't really an option. So I'm looking to see if hedged funds are available, and it looks like there are some, as members have mentioned above.

Have a read of https://personal.vanguard.com/pdf/ISGPCH.pdf , and look at figure 4 - my impression from that is that for some circumstances hedged returns are more volatile than unhedged returns.

Given that the hedge will itself cost you money (and I'd guess it will appear as a cost/year, so it will compound?) and the exchange rate may move for or against you, I'm not convinced it is as helpful you hope.

[shopper150]

rockin said:

shopper150 said:

I want to invest in US equities because their performance has outstripped UK equities by a country mile, and I do not see that changing.

Which begs a couple of questions,
Why were you not in US equities previously?
Why do you think US equities will continue to outperform UK?

I am, but I am dollar denominated l and predominantly in individual stocks as far as US exposure goes.

I don’t see any reason why UK or EU growth will outpace the USA.

[anonymous-user]

Since you've been in North American stocks for a while I suggest the very large gains already made will absolutely dwarf any exchange rate exposure.

And if, as you suggest, UK continues to lag North America it's far from clear what might cause the £pound to strengthen enough to cause any material exchange rate problem.