I am looking up NASDAQ ETFs that can be purchased in the UK. What is the difference between:
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2The second has "£ HDG" on the end of its name. Some kind of Sterling hedge???– TripeHoundCommented Aug 6, 2019 at 10:59
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1 Answer
The EQQQ exchange-traded fund tracks the Nasdaq 100 and has US Dollar as its base currency. So you can buy it in GBP but performance will be affected by your GBP essentially being converted to dollars on the way in and way out. This can give you exchange rate downside, or upside, depending on the timing of your transactions.
The EQGB is essentially the same fund but aims to balance out the effect of exchange rate fluctuations by hedging the currency. To quote Invesco’s own description (empasis mine),
To minimise exposure to fluctuations in the exchange rate between USD and GBP, the GBP Hedged share class enters into foreign exchange transactions (typically short dated currency forwards, with the hedge reset daily to 100% of NAV).
Hat tip to TripeHound’s comment for hinting at the right answer.
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1Also worth noting this hedging isn't a free lunch to take. Looks like the fees on the hedged product are higher at 0.35% vs 0.3% and the indicative spread is also higher at 0.19% vs 0.13%.– PhilipCommented Aug 7, 2019 at 17:08