Example: Amundi Index Solutions - Amundi S&P 500 UCITS ETF C EUR. Traded in EUR but underlying assets are in USD. Assume I buy it from an assurance-vie account based in France. Is there any currency conversion charge (including suboptimal rate) when purchasing an ETF whose underlying assets are in a different currency? If so, is it part of the Ongoing Charge, or separate? If separate, where can I see the charge?
asked Feb 22 at 23:25
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1 Answer
I can't speak to the specifics of your broker or France, but it's unlikely. When you buy an ETF priced in euros at a European exchange, you are doing just that - buying something for euros on a European exchange.
When you buy an ETF you do not buy the underlying assets. Rather, what happens is that you buy some shares of the ETF. If the ETF gets much out-of-balance with its underlying assets, massive hedge funds with the ETF's approval make a profit by buying the underlying assets and trading them to the ETF in exchange for new ETF shares, or vice versa. This keeps the price close to the underlying asset value, especially for very big ETFs like S&P 500 ETFs.
Similarly, if the prices in the US are different from the prices in Europe, some massive hedge fund will make a profit by buying them in one place and selling them in another, and figuring out how to get the shares from one country to another if that is needed.
