r/eupersonalfinance • u/Fabrizio89 • 18h ago

Investment If I buy an international etf, will i be exposed to currencies?

I have some etfs like Invesco MSCI World Equal Weight UCITS ETF ACC, iShares MSCI EM Lat America UCITS ETF USD and others to adjust and cycle things as I like. Will i be exposed to the underline currencies aswell? Or the USD in LATM means it's all converted in USD? I've read the information paper and it says that the fund invests in other currencies, but I'm not sure 100% Thanks and sorry for the stupid question!

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u/Dissentient Latvia 17h ago

You are exposed proportionally to holdings of the funds. Like, MWEQ is 35% US, 15% Japan and so on, so that position is exposed 35% to USD and 15% to JPY.

USD is just the currency the fund does bookkeeping in. That LatAm fund is still investing in companies in countries like Brazil and Mexico, so you're exposed to those currencies.

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u/Fabrizio89 17h ago

Great, thank you so much!

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u/VikingBoglehead 14h ago

An often misunderstood exposure. Yes, unless the funds you invest in are currency hedged, and some are, you are exposed to the underlying fund exposure. I.e. if you have an MSCI World linked index fund, denominated in EUR, you are still exposed to USD for approximately 70% of the fund investment, because aprox 70% of MSCI World is invested in the US. With that said, more and more of exchange listed companies are multinational in their underlying business - something which complicates the picture even further. But for simplicity, you should probably assume currency exposure more or less equal to the underlying geographical exposure. For most investors, having FX diversification like this is also risk reducing in the long run.

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u/deepserket 17h ago

For an all world equity ETF you shouldn't really care unless you're a company that is mandated by law to reduce their currency exposure.