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Which ETFs are cross-listed and what does it mean?

ETF Watch - Mar 30, 2017

There are now around 80 ETFs available on the ASX with international exposure. This is great news for investors, with the Australian share market making up just 3% of global markets, investors can easily access the other 97% through purchase of an ETF on the ASX. Investors in ETFs may have come across the terms Australian and Internationally domiciled (also known as cross-listed). There’s some subtle differences that the country an ETF is domiciled in brings. Below we’ve taken a look at what these differences are and which ETFs are internationally domiciled or cross-listed.

What is Australian and Internationally Domiciled (Cross-Listed)?

Australian domiciled ETFs are simply those which are formed and registered in Australia. These funds are completely governed by Australian law, and are considered ‘Australian residents’ for tax purposes. 

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’. The rules that the ASX sets for cross listing are fairly stringent, meaning it tends to be only the large global ETF providers who play in this space (Blackrock, Vanguard, SPDRS & Vaneck).

What are the considerations when investing in internationally domiciled ETFs?

There’s some specific tax considerations investors must be aware of when investing in internationally domiciled ETFs. We asked David Bassanese from Betashares (whose ETFs are all Australian Domiciled) to explain some of the intricacies.  David explains “The key advantage in using locally domiciled funds providing international investment exposure is less paper work to ensure one does not pay more US withholding tax than is needed. Those investing in cross-listed funds, are required to fill out and send off a (W8-BEN) form to be eligible for reduction in US withholding taxes from 30% to 15%.  For locally domiciled funds, these forms are filled out once by the ETF provider, obviating the need for each individual investor in the fund to face this burden.”

David also told us some estate planning considerations which arise if the investor was to pass whilst holding the ETF, “…some investors may then be subject to US estate tax on their offshore investments, which is not the case with locally domiciled funds”.

There are now around 80 ETFs available on the ASX with international exposure. This is great news for investors, with the Australian share market making up just 3% of global markets, investors can easily access the other 97% through purchase of an ETF on the ASX. Investors in ETFs may have come across the terms Australian and Internationally domiciled (also known as cross-listed). There’s some subtle differences that the country an ETF is domiciled in brings. Below we’ve taken a look at what these differences are and which ETFs are internationally domiciled or cross-listed.

What is Australian and Internationally Domiciled (Cross-Listed)?

Australian domiciled ETFs are simply those which are formed and registered in Australia. These funds are completely governed by Australian law, and are considered ‘Australian residents’ for tax purposes. 

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’. The rules that the ASX sets for cross listing are fairly stringent, meaning it tends to be only the large global ETF providers who play in this space (Blackrock, Vanguard, SPDRS & Vaneck).

What are the considerations when investing in internationally domiciled ETFs?

There’s some specific tax considerations investors must be aware of when investing in internationally domiciled ETFs. We asked David Bassanese from Betashares (whose ETFs are all Australian Domiciled) to explain some of the intricacies.  David explains “The key advantage in using locally domiciled funds providing international investment exposure is less paper work to ensure one does not pay more US withholding tax than is needed. Those investing in cross-listed funds, are required to fill out and send off a (W8-BEN) form to be eligible for reduction in US withholding taxes from 30% to 15%.  For locally domiciled funds, these forms are filled out once by the ETF provider, obviating the need for each individual investor in the fund to face this burden.”

David also told us some estate planning considerations which arise if the investor was to pass whilst holding the ETF, “…some investors may then be subject to US estate tax on their offshore investments, which is not the case with locally domiciled funds”.

Which ASX listed ETFs are Internationally domiciled?

It can be somewhat difficult to establish whether a fund is Australian or Internationally domiciled, with the details tending to be buried deep in the Product Disclosure Statement (PDS). One of the giveaways is that the PDS isn’t called a PDS but a ‘Prospectus’. Additionally, the ASX terminology for cross-listed funds is CHESS Depository Interest (CDI), so any mention of CDI tends to also be a give-away. We’ve found the list of internationally domiciled funds listed on the ASX, and listed them below. All are listed primarily in the US.

Ticker Name Provider Mgmt Fee Global Mkt Cap
CETF VanEck Vectors ChinaAMC CSI 300 ETF VanEck 0.72% $3m
GDX VanEck Vectors Gold Miners ETF VanEck 0.53% $54m
IAA iShares Asia 50 ETF Blackrock 0.50% $259m
IBK iShares MSCI BRIC ETF Blackrock 0.68% $27m
IEM iShares MSCI Emerging Markets ETF Blackrock 0.68% $437m
IEU IShares Europe ETF Blackrock 0.60% $520m
IHK iShares MSCI Hong Kong ETF Blackrock 0.48% $13m
IJH iShares Core S&P MidCap 400 Blackrock 0.07% $108m
IJP iShares MSCI Japan ETF Blackrock 0.48% $191m
IJR iShares Core S&P SmallCap 600 Blackrock 0.07% $74m
IKO iShares MSCI South Korea Capped ETF Blackrock 0.62% $32m
IOO IShares Global 100 ETF Blackrock 0.40% $1,108m
IRU iShares Russell 2000 ETF Blackrock 0.20% $59m
ISG iShares MSCI Singapore ETF Blackrock 0.48% $8m
ITW iShares MSCI Taiwan ETF Blackrock 0.62% $62m
IVE iShares MSCI EAFE ETF Blackrock 0.33% $246m
IVV iShares Core S&P 500 Blackrock 0.04% $2,109m
IXI iShares Global Consumer Staples ETF Blackrock 0.47% $149m
IXJ iShares Global Healthcare ETF Blackrock 0.47% $415m
IXP iShares Global Telecom ETF Blackrock 0.47% $20m
IZZ iShares China Large-Cap ETF Blackrock 0.74% $68m
MOAT Vaneck Vectors Morningstar Wide Moat ETF VanEck 0.49% $25m
SPY SPDR S&P 500 ETF Trust State Street 0.09% $20m
VEU Vanguard All-World EX US Shares Index Vanguard 0.14% $757m
VTS Vanguard US Total Market Shares Index Vanguard 0.05% $939m

Above you can see 25 Australian listed ETFs are internationally domiciled. We’re not advocating one or the other. As David Bassanese explained, internationally domiciled funds pass more of the administrative burden onto the investor, however the above table shows they often have large asset bases behind them and are offered at low cost. Additionally, some of the markets they cover are simply not available within locally domiciled options. It is up to the individual investor to determine if the extra admin stacks up for them.

The ETF Watch Fund Database currently does not indicate whether an ETF is Australian or Internationally domiciled, however we are considering adding this feature. Would this feature be useful to you? Let us know in the comments below.

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