The Exchange-Traded Funds Manual, Second Edition

CHAPTER 12

ETFs for Investors Living Outside the United States

My experience with ETFs has been principally in the United States. I have had enough exposure to ETFs offered in other countries to understand that most of them have many of the same features found in the best ETFs offered in the United States. However, I have seen a number of news reports and academic papers that inaccurately attribute some characteristics of U.S. ETFs to ETFs in Europe, Asia, or Latin America. I know from my examination of non-U.S. ETFs that many of them operate differently from most U.S. ETFs. What I attempt to do in this chapter is to describe my understanding of some significant similarities and differences and what investors outside of the United States should look for in the ETFs offered to them.

SOME FEATURES OF THE ETFs DESCRIBED IN THIS BOOK ARE NOT UNIVERSAL

As indicated in various places in the earlier chapters of the book, there are at least three standard features of most U.S. ETFs, particularly the investment company-based ETFs that are similar to exchange-traded fund products offered to investors in many countries. The first of these features is investor protection from the cost of accommodating investors entering and leaving the fund. This kind of investor protection is something most U.S. investment company ETFs have done extraordinarily well. Many of the ETFs offered by major providers in other countries seem to do this equally well, but I will have more to say on this topic later ...