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iShares converts internationally domiciled ETFs to Australian

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. They are also closing 5 ETFs.

By 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:

TickerNameProviderMgmt FeeMkt Cap
IAAiShares Asia 50 ETFBlackrock0.50%$429m
IEMiShares MSCI Emerging Markets ETFBlackrock0.68%$668m
IEUIShares Europe ETFBlackrock0.60%$842m
IJHiShares Core S&P MidCap 400Blackrock0.07%$145m
IJPiShares MSCI Japan ETFBlackrock0.48%$245m
IJRiShares Core S&P SmallCap 600Blackrock0.07%$115m
IKOiShares MSCI South Korea Capped ETFBlackrock0.62%$43m
IOOIShares Global 100 ETFBlackrock0.40%$1,388m
IRUiShares Russell 2000 ETFBlackrock0.20%$77m
ITWiShares MSCI Taiwan ETFBlackrock0.62%$45m
IVEiShares MSCI EAFE ETFBlackrock0.33%$329m
IVViShares Core S&P 500Blackrock0.04%$2,567m
IXIiShares Global Consumer Staples ETFBlackrock0.47%$109m
IXJiShares Global Healthcare ETFBlackrock0.47%$501m
IZZiShares China Large-Cap ETFBlackrock0.74%$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:

TickerNameProviderMgmt FeeMkt Cap
IBKiShares MSCI BRIC ETFBlackrock0.68%$39m
IHKiShares MSCI Hong Kong ETFBlackrock0.48%$16m
IRUiShares Russell 2000 ETFBlackrock0.20%$77m
ISGiShares MSCI Singapore ETFBlackrock0.48%$7m
IXPiShares Global Telecom ETFBlackrock0.47%$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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