Ten expensive ETFs

by , 1st October 2017

Following my article on the ‘Ten Cheapest ETFs’, I thought it would be a good idea to look at some of the most expensive London-listed ETFs. I’m not going to look at the ten most expensive ETFs of them all – instead I’m going to highlight ten expensive ones that interest me most.

  1. CSOP Source FTSE China A50 UCITS ETF GBP (LSE:CHNP) Total Expense Ratio (TER) 1.15%

This ETF tracks the FTSE China A50 index. This comprises the 50 largest Chinese ‘A’ shares listed on the Shanghai or Shenzen stock exchanges. A-shares are shares of companies incorporated in mainland China, listed on Shanghai or Shenzen, which traditionally were only available to Chinese investors. A-shares have gradually become more and more accessible for overseas investors.

Bluntly this ETF is too expensive. If you want to invest in Chinese A-shares, you could go for the Lyxor CSI 300 UCITS ETF (LSE:CNIL) , which has a TER of just 0.4% a year, so a much cheaper option. It tracks a different index, the CSI 300, but this is once again an index that comprises ‘A’ shares listed on Shanghai or Shenzen. Obviously the big difference with the FTSE China 50 index is that the CSI index is made up of more stocks.

  1. Boost Copper 3x Leverage Daily ETP (LSE:3HCL) TER 0.99%

The idea behind this product is that if the copper price rises 3% on a day, then this product will rise by 3 times that amount – 9%. If the price of copper falls 3%, then the price of this product will fall by 9%.

It’s worth noting that this is an Exchange Traded Product (ETP) rather than an Exchange Traded Fund (ETF). That’s because most single-commodity funds don’t get approval to be ETFs because they’re seen as riskier options.

The product is also very risky because its leveraged nature means that you can lose a lot of money very quickly if the price of copper moves against you. What’s more, although the performance of the ETP should be closely linked to the performance of the copper price over a period of days or weeks, that linkage breaks down over longer periods for technical reasons. So this product is really only suitable for risk-tolerant and experienced traders.

Boost run a range of similar leveraged ETPs for other commodities.

In terms of price, clearly this is way higher than for most other ETFS and ETPs, but you won’t get this level of leverage elsewhere. ETF Securities offers some cheaper leveraged commodity-based products, but none of them offer 3x leverage.

  1. db x-trackers S&P Select Frontiers UCITS ETF USD (LSE:XSFD) TER 0.95%

This ETF invests in companies operating in frontier markets such as Kuwait, Bangladesh, Botswana and Tunisia. Well-known emerging markets such as China and Brazil aren’t classified as frontier markets – frontier markets are less developed than the leading emerging markets.

This ETF tracks 40 of the largest and most liquid stocks in the S&P Extended Frontier 150, which is made up of stocks in 36 frontier markets.

A TER of 0.95% isn’t cheap but buying shares in frontier markets will be a more expensive process than investing in the likes of HSBC on the FTSE 100. There also isn’t much passive competition for db x-trackers in this area and when you look at rival active funds, they also have very high costs. For example, the highly-regarded Black Rock Frontiers Investment Trust has a TER of 1.51%.

  1. ETFS-E Fund MSCI China A GO UCITS ETF GBP (LSE: CASE)    TER – 0.91%

This is another ETF that can give you exposure to Chinese ‘A’ shares. It tracks a third A-Share index – the MSCI China A index. This index comprises 874 stocks so you’re getting more diversification than you’d get from the FTSE China A 50 index or the CSI 300 index.            

Once again, the Lyxor CSI 300 UCITS ETF (LSE:CNIL) looks a better bet thanks to its lower TER at 0.4%.

  1. LAM ZyFin Global Markets UCITS ETF plc Alternatif ZyFin Turkey Sovereign Bonds UCITS ETF (LSE: TURK) TER – 0.89%

This ETF gives you access to Turkish government bonds across a range of different durations. It’s a pretty esoteric area so I guess it’s not a total surprise the charges are so high. I’d suggest that most investors should go for a fund or ETF that invests in a wider range of bonds with lower charges.

  1. db x-trackers FTSE Vietnam UCITS ETF 1C (LSE:XVTD) TER – 0.85%

This ETF tracks the FTSE Vietnam Index which comprises the larger, more liquid stocks on the Ho Chi Minh Stock Exchange – they also have to be stocks that are accessible to foreign investors.

There are no other ETFs that are solely focused on Vietnam, so if you’re very keen to invest in Vietnam, you may be willing to pay 0.85% a year. But in my view, you’re better off investing in a wider emerging markets ETF with lower charges.

  1. db x-trackers MSCI Bangladesh IM Index UCITS ETF 1C (LSE:XBAN) TER – 0.85% 

This ETF tracks the MSCI Bangladesh Index which has around 45 constituents. It’s a similar beast to the FTSE Vietnam ETF above. Once again, most investors are probably better off going for a broader emerging markets ETF.

  1. db x-trackers MSCI Pakistan IM index UCITS ETF 1C (LSE:XBAK) TER – 0.85%

This is very similar to the Vietnam and Bangladesh ETFS with the same pros and cons. The MSCI Pakistan IM index comprises around 33 stocks.

  1. db x-trackers Nifty 50 UCITS ETF 1C (GBP) (LSE:XNIF)  TER – 0.85%

This ETF tracks India’s Nifty Fifty index. Even at 0.85%, the TER is well below the fund’s main active rivals. For example the active JP Morgan India investment trust has a TER of 0.84%. db x-trackers also operate a slightly cheaper India ETF, the db x-trackers MSCI India Index UCITS ETF 1C USD (LSE:XCS5)

  1. Lyxor MSCI India UCITS ETF (GBP) (LSE:INRL) TER – 0.85%

This ETF tracks the MSCI India Index. You can save ten basis points each year if you go for the db x-trackers MSCI Index I mentioned above.

For more ETF ideas, read Four top emerging markets ETFs.

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