iShares launches synthetic S&P 500 ETF

The iShares S&P 500 Swap UCITS ETF offers investors access to the US stockmarket

The iShares S&P 500 Swap UCITS ETF offers investors access to the US stockmarket

A synthetic S&P 500 ETF has been launched by iShares, offering investors access to the US index via a swap-backed product.

The iShares S&P 500 Swap UCITS ETF is available to investors on Euronext today and London Stock Exchange and Xetra as of 29 September for a total expense ratio of 0.07%.

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This expands the range of S&P 500 ETFs on offer for investors, which includes the $37bn physically replicated iShares S&P 500 Core UCITS ETF.

JP Morgan and Citi will act as the swap counterparties on the synthetic fund, the design of which offers investors an ETF which does not pay withholding tax on dividends.

Ben Seager-Scott, head of multi-asset funds at Tilney Group, described the launch as a “really positive development for ETF investors” that could see investors save “in the order of 30 basis points”.

He added: “The synthetic approach is not for everyone, and as always investors should ensure they fully understand the products before investing, but it is great to see iShares starting to bring these products a little more to the mainstream. This particular strategy is well-known to professional investors for enhancing returns since they are not subject to withholding tax through this approach.

“At a time when many people are splitting hairs over a few basis points’ difference on fees, a simple enhancement that has historically been in the order of 30 basis points is a big deal. Offering the choice at a competitive base fee is a very welcome development, and I expect it will get a lot of interest as the investor base continues to become comfortable with a wider range of approaches.”

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