Brexit. Why have I started the article with this word when the title clearly says top British pound ETFs? Because it’s crucial to the topic and I need to give you a heads up before I actually list the British pound ETFs. I’ll get to those in just a minute.
It’s incredibly difficult right now to state for sure how the British pound will do, mainly, you’ve guessed it, because of a little thing we’ve come to call Brexit. You can ask around or do some research, and you’ll still come up with contrary answers.
Some say that Britain might actually be going toward technical recession. That would be due to the fact that the pound itself is losing face when put against our very own dollar. By contrast, other voices say that Britain is, in fact, heading toward a big economic growth, thanks to Brexit.
All of these factors need to be taken into consideration when speaking and, more importantly, choosing and ranking the top 3 British pound ETFs.
To continue to the point I was making above, it doesn’t actually matter which side you choose to take. The truth is the British pound saw 2016 as one of the worst years in its history. Yes, you read that well. At the end of the year, the currency was actually performing so badly that it was one of the worst in the G10.
Not to mention that, for one fleeting and historic moment in 2016, the British pound sunk to $1.15. It was the worst it had ever performed in the past 45 years.
Still, beyond these remarkable facts that could make interesting conversation starters at a party for geeks like us, how can this info concern us as investors? Well, here’s the catch. This relative weakness that the currency seems to present can be an attractive point for investors around. If you’re willing to wait for all the economic turmoil to end and go for the recovery, that is. Moreover, if you, as an investor, are thinking about adding some exposure to the pound, then the 3 British pound ETFs I’ve prepared are quite a nice place to begin.
That being said, let’s not beat around the bush anymore and get right down to business.
Here’s the top.
1. Currency Shares British Pound Sterling (FXB)
The issuer here is Guggenheim CurrencyShares. We’re talking about $294 million in asset under management, -16.67 percent YTD Performance, and 0.40 expense ratio.
There are two major players when it comes to the British pound, and this is definitely one of them. It has only one real competitor, the iPath GBP/USD Exchange Rate Fund (GBB) but we can surely say it minimizes its asset base. Also, it has a cost of 40 basis points, and its strategy is simple. It holds an uninsured deposit of the physical pounds at JPMorgan. However, the fund itself enjoys very tight spreads and good liquidity. This means it’s really easy to trade, even if you’re a small investor.
The important thing to keep in mind here is that there’s a problem with the first entry on the list of British pound ETFs. The issue is the tax efficiency. All the distributions and gains will be treated as typical income when it comes to taxes.
At the same time, when it comes to performance, the fund itself hasn’t impressed a lot. However, keep in mind that this is something we should all be expecting, given just how volatile everything is with the global economy. When it comes to total annualized returns, for three and five years, we’re looking at figures of -9.94 percent and -5.01 percent respectively.
2. iPath GBP/USD Exchange Rate ETN (GBB)
The issuer for the number two entry on our British pound ETFs list is Barclays Bank. There’s $4.07 million in Asset Under ManagementoHowever,
, the YTD Performance is -17.55 percent, and the expense ratio is 0.40 percent.
As I mentioned for the first top British pound ETFS, this is the second big player of the game. However, given the fact that it has such a small asset base, it will definitely bring a lot of risks to the table. This is something you will need to take into consideration, especially if you’re a small investor.
If we were to talk about a trading average, then the number I could give you is around $62,000 a day. Again, as you can see, we have another problem, in the form of liquidity. The same as with our number one ETF, all the gains are and will be taxed like a traditional and regular income. Therefore, watch out for that as well in your calculations.
You will notice that this fund has the same structure as an ETN, which means it’s basically a debt security. Therefore, it will also have all the risks that come as a package deal with the debt security itself.
As per the three and five-year total return per annum, they are -10.27 percent and -5.14 percent respectively.
3. Powershares DB US Dollar Index Bearish Fund
The issuer here is Invesco. There is $32.8 million in Assets Under Management, a YTD Performance of -4.48 percent, and 0.56 percent in the expense ratio. If you were to tell me that this last entry on the British pound ETFs list is not technically an ETF, you would be right.
In facts, what it does is it puts our dollar against other big currencies, such as the Yen, the very British pound we’re discussing in this piece, the Krona, the Euro, the Canadian Dollar, and the Franc of Sweden. The way it works is simple too. It shorts USDX contracts that weigh heavily toward the Euro, thus turning it very sensitive when it comes to movements of the currency itself.
As far as the index goes, the British pound is the very next huge bit of it. It accounts for approximately 20 percent of it when you compare it with that of the euro, which is 50 percent.
When it comes to risk, I can fairly say that it is moderate. As far as liquidity is concerned, it’s not that great either. We’re looking at $1.2 million in average volumes per day. The three and five total returns per annum were -8.49 percent and -5.07 percent respectively.
As promised, here are the top three British pound ETFs. What do you think of them? Please let me know in the comment section below.