VXUS UCITS alternative

[Ex Pat]

Hello

Part of my Investment Policy Statement, I have a "I manage US concentration risk" rule, and I mention a vague "ex‑US ETF" , but I haven't decided on the ex-US ETF yet.

I would like to include both developed and emerging markets.
And I'd like to start directly with UCITS , non US domiciled ETF.

The problem is that , as far as I can tell, there is not VXUS equivalent.

From what I can see, I can make VXUS out of {EXUS + EMIM} or {XUSE + EMIM).

So my "US-capped" portfolio would look something like
- 48% VT
- 7% EXUS or XUSE
- 5% EMIM
- CHSPI 16%
- cash 10%
- gold 10%
- btc + p2p 4%

Which would make my global equities be 80% VT and 20% ex-US, which would limit to ±50% of US exposure in my global equities sleeve.
(keeping things separate from the CHSPI local bias which doesn't have something to do with US exposure per se)

Question 1: any idea of which between EXUS and XUSE is better?

The LLM says XUSE wins on bid-ask spread and liquidity, but I don't really know if that's important for me (long-term investment; only monthly buys). And I also don't know if there are other factors I should consider when comparing the two.

Question 2: for @Baptiste Wicht - you mentioned in https://thepoorswiss.com/portfolio/ that
> I have realized that small percentages do not help much the portfolio. I do not want any allocation smaller than 10% in my portfolio.

What do you mean here? I mean, what led you to this conclusion? (which later on , you simplified even further)
I guess 12% ex-US is more than 10%, but de facto it's spread.

Question 3: I have to admit that limiting US over-exposure is more of a philosophical thing. I cannot answer to the question "so what?". Why would limiting US over-exposure help (except the principle of avoiding single-country over-exposure)? (maybe someone else does this in their portfolio and can answer the question?)

 

[Baptiste Wicht]

Question 1: any idea of which between EXUS and XUSE is better?

The LLM says XUSE wins on bid-ask spread and liquidity, but I don't really know if that's important for me (long-term investment; only monthly buys). And I also don't know if there are other factors I should consider when comparing the two.

For long-term, I would say it should not matter much. The spread is a good thing to consider, but it's a small factor since it only occurs twice (buying and selling).

Question 2: for @Baptiste Wicht - you mentioned in https://thepoorswiss.com/portfolio/ that
> I have realized that small percentages do not help much the portfolio. I do not want any allocation smaller than 10% in my portfolio.

What do you mean here? I mean, what led you to this conclusion? (which later on , you simplified even further)
I guess 12% ex-US is more than 10%, but de facto it's spread.

What I mean is that in a large portfolio, 5% in something will not matter much for the total returns.

However, in your case, it's different since you are modifying the total allocation, so I don't think my rule matters here. If you were adding 5% small-cap European stocks to your portfolio for returns, I would say it's pointless.

Question 3: I have to admit that limiting US over-exposure is more of a philosophical thing. I cannot answer to the question "so what?". Why would limiting US over-exposure help (except the principle of avoiding single-country over-exposure)? (maybe someone else does this in their portfolio and can answer the question?)

I am not convinced about the idea myself. In theory, this would protect you in case the US stock market is more overvalued than other markets when the markets finally crash.

 

[Ex Pat]

I am not convinced about the idea myself. In theory, this would protect you in case the US stock market is more overvalued than other markets when the markets finally crash.

For me, there are a few things that annoy me:
- US , due to current market capitalization, gets most of the money (thus an implicit country bet)
- the concentration in a few companies (7 companies getting almost 20% of VT new money)
- the fact that passive investment (due to its own success) consolidates the rankings (the mere existence of the index biases the market)

However, in your case, it's different since you are modifying the total allocation

Indeed.

But it helps to remember that this remains a big juicy market for large companies. So we have to be careful

And changing country allocation by limiting US concentration won't change this, but at least it will diversify how the money is split among the large corporations.

IMO I would really like a market capitalization based global ETF like VT, but with a simple rule if capping a single company to something like max 1% of the index. If one company reaches 1%, it's reasonably enough to recognize it's global impact.

 

[Baptiste Wicht]

IMO I would really like a market capitalization based global ETF like VT, but with a simple rule if capping a single company to something like max 1% of the index. If one company reaches 1%, it's reasonably enough to recognize it's global impact.

Some of the sustainable options have a 5% max rule I believe, but 5% is already huge.

You could look at equal-weighted funds, but it is a strong move away from market-cap-weighted.

 

[Ex Pat]

You could look at equal-weighted funds, but it is a strong move away from market-cap-weighted.

IMO equal weight is another extreme that I would like to avoid.

 

[gaijin]

Alternatively, you could use an equal weight index for just USA (such as MSCI USA Equal Weighted Index and the product
iShares MSCI USA Equal Weighted ETF. For the rest of the world you use the ex US index and a product such as Xtrackers MSCI World ex USA UCITS ETF 1C or FTSE Global All Cap ex US Index and a product such as Vanguard Total International Stock ETF. Note, however, that the biggest companies in this index are also tech companies (TSMC and Samsung).

Still, there is probably no index that you can easily invest in. So you would need to become a more active investor, making your own choices and selections.