Background:
After rebalancing my SIPP, I have an amount which I want to put into the US pool of my SIPP.
This pool already contains an S&P tracker (40% of pool) and US Dividend Aristocrats (55%) and the Vanguard North American (5%).
My default would be to add to the Vanguard fund, but I'm rather concerned about over concentration at the top. It's slightly less extreme than the S&P, but nevertheless, the top 10 shares are 20%.
So my intention is to go for equal weight. I used to have equal weight FTSE100, till it got closed down, and use a "light-touch" equal weight on my HYP, a la TJH, so I'm happy to use that.
The options:
There's an equal weight S&P by x-trackers. It's big, reasonable fees, and quarterly rebalanced. But the fact (no sh1t, Sherlock) that each stock is only about 0.2% (even Tesla is only .25%) makes me start humming and hawing.
However there's a North American 100 equal weight ETF by VanEck, that I feel myself gravitating towards. Fees are reasonable .20% and it's been running since 2015. It's only rebalanced once a year, so Tesla has reached 2.92%. I don't mind that.
Issue one: But it's still only GBP8m in size despite running for almost 5 years (vs GBP1.8bn for the x-tracker). I can live with this though. I've had ETFs closed down before, and in fact this rebalancing is due to Vanguard closing down their beta ETFs
Issue two: It would be the first non-Ireland domiciled ETF, and I'm concerned about what is going to happen as a result of Brexit in terms of any Dutch withholding tax - it's a distributing fund. There's a small-print comment that says
The Dutch domiciled ETFs use a gross reinvestment index as opposed to many other ETFs and investment funds that use a net reinvestment index. Comparing with a gross reinvestment index is the purest form since it considers that Dutch investors can deduct or reclaim the dividend tax levied. Please note that the performance includes income distributions gross of Dutch withholding tax because Dutch investors can deduct or reclaim the 15% Dutch withholding tax levied. Different investor types and investors from other jurisdictions may not be able to achieve the same level of performance due to their tax status and local tax rules.
Am I overworrying about this? My very limited understanding is there's some kind of agreement about these products to carry on as they are that was signed last year and runs for three years on the basis of no-deal.
I appreciate this dilemma covers 3 separate areas that people can comment on
- use of equal weight products
- small vs large
- potential tax issues for overseas domiciled ETFs
but I'm happy to hear.
torata