Lyxor

[GeoffF100]

Here is a good article on Lyxor ETFs on Monevator:

http://monevator.com/lyxor-core-etfs-ve ... -wrinkles/

[hiriskpaul]

Very interesting, especially the bit about the 30% withholding tax on US shares paid by the US ETF. Cannot understand why Lyxor domicile the ETF in Luxembourg. As one of the comments points out, the uncompetitive tax treaty with the US rules out the ETF for consideration when compared to Irish domiciled ETFs from Vanguard, iShares, HSBC, etc.

Good to see competition bringing down the fees.

[GeoffF100]

Very interesting, especially the bit about the 30% withholding tax on US shares paid by the US ETF. Cannot understand why Lyxor domicile the ETF in Luxembourg. As one of the comments points out, the uncompetitive tax treaty with the US rules out the ETF for consideration when compared to Irish domiciled ETFs from Vanguard, iShares, HSBC, etc.

It would be strange if Luxembourgers could side step the extra withholding tax that they would pay on direct US investment by buying an Irish domiciled ETF. Perhaps their tax treaty with the US prevents them from doing this, hence the need for a Luxembourg domiciled fund. The strange composition of the "UK" tracker is harder to understand.

[colin]

Interesting link, I do find Monevator the most easily read of all the financial sites , being entertained and amused while learning about this stuff does , like a spoon full of sugar, help the medicine go down.

[hiriskpaul]

As the management fees come down, the fees charged by index providers become more significant. The only reason I can think of for Lyxor to follow the obscure Morningstar UK index is that Morningstar charge less than FTSE Russell.

[OhNoNotimAgain]

As usual the cost of the spread is ignored when talking about ETFs.

[GeoffF100]

The spread is not a significant cost for many people. OEICs and ETFs have their pros and cons, but that is not the subject of this thread.

[colin]

OEICs and ETFs have their pros and cons, but that is not the subject of this thread.

The subject of this thread is an article comparing the pros and cons of lyxor ETFs to the ETfs of other providers,in my opinion differences in bid offer spreads are absolutely relevant.

[OhNoNotimAgain]

OEICs and ETFs have their pros and cons, but that is not the subject of this thread.

The subject of this thread is an article comparing the pros and cons of lyxor ETFs to the ETfs of other providers,in my opinion differences in bid offer spreads are absolutely relevant.

The thread is about costs of ETFs and it doesn't suit the providers of them to talk about spreads. Journalists don't understand it either so they don't pick it up but spread is a crucial part of the costs in the same way that a dilution levy can be for an OEIC.

[tjh290633]

Looking at IUKD just now, it is 911.9 buy, 910.2 sell, a spread of 1.7p. I make that about 0.2%. From the fact sheet, the TER is 0.4%. The yield is 5.23% according to HL.co.uk.

TJH

[hiriskpaul]

According to Hargreaves Lansdown the spread on MEUD (Lyxor EuroStoxx 600 ETF) is 0.17%. That compares with 0.01% for the similar broad European ETF from Vanguard (VEUR). So certainly something to be aware of, especially if expected holding time is likely to be short.

[mc2fool]

According to Hargreaves Lansdown the spread on MEUD (Lyxor EuroStoxx 600 ETF) is 0.17%. That compares with 0.01% for the similar broad European ETF from Vanguard (VEUR). So certainly something to be aware of, especially if expected holding time is likely to be short.

??? At time of writing:

MEUD Sell: 13,246.00p Buy: 13,262.00p http://www.hl.co.uk/shares/shares-searc ... rope-c-eur
VEUR Sell: £27.10     Buy: £27.13     http://www.hl.co.uk/shares/shares-searc ... ped-europe

I make those spreads 0.12% and 0.11% respectively.

[hiriskpaul]

According to Hargreaves Lansdown the spread on MEUD (Lyxor EuroStoxx 600 ETF) is 0.17%. That compares with 0.01% for the similar broad European ETF from Vanguard (VEUR). So certainly something to be aware of, especially if expected holding time is likely to be short.

??? At time of writing:

MEUD Sell: 13,246.00p Buy: 13,262.00p http://www.hl.co.uk/shares/shares-searc ... rope-c-eur
VEUR Sell: £27.10     Buy: £27.13     http://www.hl.co.uk/shares/shares-searc ... ped-europe

I make those spreads 0.12% and 0.11% respectively.

Whoops, quite right, I added an extra zero! iShares IMEU has a lower spread of about 0.05%. Much higher management charge though at 0.35%.

[hiriskpaul]

By the way, Some of HSBC's tracker OEICs are very competitively priced now and we'll worth a look. For example the C class European index fund, which excludes UK, has a management charge of only 0.07% and no bid/ask spread (supposedly). You would of course need to be wary of any percentage platform charges with OEICS.

[OhNoNotimAgain]

I doubt the data is available but a time series of spreads during periods of market stress would be illuminataing.

Certainly, some intermediaries are not keen on ETFs because liquidity can evaporate just when it is needed.

[colin]

The thread is about costs of ETFs

No it's not . The subject of the thread is the article linked to in the first post.

[GeoffF100]

I doubt the data is available but a time series of spreads during periods of market stress would be illuminataing.

Certainly, some intermediaries are not keen on ETFs because liquidity can evaporate just when it is needed.

I do not believe that it is sensible to trade ETFs at times of market stress, particularly if they have assets that are not very liquid. I also do not believe that selling because the market has taken a tumble is sensible either. I always do lots of price checking before trading ETFs, having had my fingers burned once on SLXX. I do not particularly like ETFs, but there is not always a reasonable alternative.

In my experience, spreads for Vanguard ETFs are usually about 0.1%, which is about the same as for blue chip shares. I looked at the spreads for the Lyxor gilt funds, and they were not significantly different. The spread will not be a significant cost for most long term holders, but it is not negligible on large sums.

[GeoffF100]

iShares IMEU has a lower spread of about 0.05%. Much higher management charge though at 0.35%.

Now showing 0.07%. The spreads fluctuate all the time, and you usually get a price within the spread. I doubt whether there is much if any consistent difference between the spreads of the more liquid ETFs.

[colin]

I do not believe that it is sensible to trade ETFs at times of market stress, particularly if they have assets that are not very liquid.

Wide bid offer spreads during market crises favor buyers at the expense of sellers, I like others who used TMF site were able to buy corporate bonds through Barclays ishares etf SLXX during the most dramatic period of the financial crisis, a diversified portfolio of investment grade bonds for a short time yielded 9%!! No market maker would trade the underlying bonds but they could still be bought through the ETF.

[GeoffF100]

I do not believe that it is sensible to trade ETFs at times of market stress, particularly if they have assets that are not very liquid.

Wide bid offer spreads during market crises favor buyers at the expense of sellers, I like others who used TMF site were able to buy corporate bonds through Barclays ishares etf SLXX during the most dramatic period of the financial crisis, a diversified portfolio of investment grade bonds for a short time yielded 9%!! No market maker would trade the underlying bonds but they could still be bought through the ETF.

Wide spreads with the mid price unchanged disadvantage both buyers and sellers. Market makers can increase spreads because of market volatility. The Lyxor 0-5 year gilt ETF GIL5 appears to have lower spread than most ETFs, which I expect is a result of its low volatility:

http://www.hl.co.uk/shares/shares-searc ... actuaries2

ETFs can trade at large discounts or premiums to NAV:

http://www.etf.com/sections/features-an ... nopaging=1

A large discount to NAV can outweigh the effect of a wide spread. Aside from the spread and discount/premium, there is also the issue of price spikes:

https://www.barrons.com/articles/sudden ... 1419360316

You can find the NAV the previous day for ETFs, e.g.:

https://www.vanguardinvestor.co.uk/inve ... _fund_link

It is important to check this against the price quoted to buy or sell.

Buyer and seller beware!