Obviously derivatives in general can do that but I think here it is literally just a hedge so if the pound falls in value, the derivative makes money and the value of the ETFs stay the same. So it shouldn’t matter. Essentially only go for unhedged if you think currency fluctuations will go in your favour.
Not an expert, I dropped economics at school because I thought it was boring🐥
Only Currency Hedged share classes of the ETFs will use derivatives
IUSA, CSP1, VUAG, VUSA are not currency hedged versions of the underlying fund and therefore will not use derivatives.
GSPX and IGUS are the currency hedged versions of IUSA and CSP1. They use derivatives to offset changes between GBP to USD. If the pound strengthens vs dollar then the hedged ETF will outperform. The opposite is true if the pound weakens relative to the dollar. The use of these derivatives are relatively safe
Is this a good idea? If you plan to hold for a very long time then a popular method is to split hedge/unhedged 50/50. Many people ignore changes in currency over the long term and just go for the unhedged tracker.
It’s a toss up between CSP1 and VUAG for me. Both track same index, are low costs 0.07%, and re-invest the divs. VUAG is newer, and has $7 Million less volume, and is in USD unlike CSP1 is in EUR.
Why would I want it demoninated in EUR when I’m mostly in GBP. Isn’t this an extra convertsion from my GBP to EUR to USD, and then back again on exit? This might be HL reporting it strangly, because their site also states that both are in GPX or GBP.
HL are just quoting the fund size in Euro’s instead of Dollars it’s not an extra conversion just the fund size expressed in a different currency.
Bear in mind CSP1 shares are £306 each . Both funds are excellent choices for S&P 500 acc .
Go to iShares and vanguard for information. Brokers don’t really quality check the data that they pull and so costs and other information may not be perfect
