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iShares converts internationally domiciled ETFs to Australian

ETF Watch - May 04, 2018

Blackrock Australia has recently announced that they will be converting 14 of their iShares US domiciled ETFs to Australian domiciled ETFs, removing the pesky W8-BEN form as a requirement for investors in these products.

We took a look at the ETFs listed on the ASX last year which are cross listed. There are 25 in total. Removing these 14 in the list will greatly reduce the amount of these, making admin for Australian investors much simpler.

What does this mean?

Internationally domiciled ETFs (cross-listed) are where an ETF is already established and running in another country (generally the USA). As long as the ETF meets certain criteria, the ASX allows the fund to be listed in Australia, however for all intents and purposes the fund is a resident of its home country, and governed by their legal and tax system. As a result the fund is considered ‘cross-listed’. For non residents, US withholding tax on distributions is 30%, however with a tax treaty with Australia, this tax rate can be reduced to 15%, if the investor filles out a 'W8-BEN' form. A form that must be completed and mailed every 3 years. For first time investors in these funds, this can be confusing and a seeminly unnecessary admin burden. There are also estate planning considerations with these cross-listed products, with death taxes applying to estates of deceased holders of these funds.

By converting these 14 products to locally listed, iShares have simplified these products for local investors. The added advantage is they are now able to offer dividend reinvestment, something that was unavailable on the cross-listed products. Full details can be found in the ASX announcement.

What are the ETFs?

The list of ETFs are listed below:

Ticker Name Provider Mgmt Fee Mkt Cap
IAA iShares Asia 50 ETF Blackrock 0.50% $429m
IEM iShares MSCI Emerging Markets ETF Blackrock 0.68% $668m
IEU IShares Europe ETF Blackrock 0.60% $842m
IJH iShares Core S&P MidCap 400 Blackrock 0.07% $145m
IJP iShares MSCI Japan ETF Blackrock 0.48% $245m
IJR iShares Core S&P SmallCap 600 Blackrock 0.07% $115m
IKO iShares MSCI South Korea Capped ETF Blackrock 0.62% $43m
IOO IShares Global 100 ETF Blackrock 0.40% $1,388m
IRU iShares Russell 2000 ETF Blackrock 0.20% $77m
ITW iShares MSCI Taiwan ETF Blackrock 0.62% $45m
IVE iShares MSCI EAFE ETF Blackrock 0.33% $329m
IVV iShares Core S&P 500 Blackrock 0.04% $2,567m
IXI iShares Global Consumer Staples ETF Blackrock 0.47% $109m
IXJ iShares Global Healthcare ETF Blackrock 0.47% $501m
IZZ iShares China Large-Cap ETF Blackrock 0.74% $102m

iShares closing 5 ETFs

In a reasonably uncommon move in Australian ETFs, iShares have also announced the closure of 5 of their lower inflow ETFs. All have market capitalisations of under $100m, and have obviously been deemed non commercial by iShares. These products were also cross-listed, meaning upon closure only a total of 6 cross listed ETFs will remain.

Investors in these funds have until 15 June 2018 to sell their shares, or else they will be sold on their behalf in August 2018. Full details can be found in the announcement from iShares.

The list of products closing are listed below:

Ticker Name Provider Mgmt Fee Mkt Cap
IBK iShares MSCI BRIC ETF Blackrock 0.68% $39m
IHK iShares MSCI Hong Kong ETF Blackrock 0.48% $16m
IRU iShares Russell 2000 ETF Blackrock 0.20% $77m
ISG iShares MSCI Singapore ETF Blackrock 0.48% $7m
IXP iShares Global Telecom ETF Blackrock 0.47% $50m

IOO, IXI, IXJ share split

Whilst certainly not as exciting as the above, to round out the recent changes by iShares, they have recently performed a share split on the IOO, IXI and IXJ funds. Investors in these products may have noticed they have twice the amount of shares now, this is due to the 2 for 1 share split that they have undertaken. Nothing has changed, it has just meant the unit prices are halved and holders now have twice as many shares. Expect notifications from your broker in the coming weeks.

Simplification of the Australian ETF landscape

With the move to Australian listing and closure of some small ETFs, only 6 cross-listed ETFs will remain in Australia. We see this as great news for investors, simplifying administrative requirements and creating a level playing field across the whole market.

 

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