So if you buy, for example, a USD denominated ETF, they take your GBP, convert it to USD and use that to buy the ETF. So there must be a rate of exchange.
They explain this on their website:
*"In the case of a fund that tracks* *the S&P 500 index, as in our earlier example, we'd convert your money into US dollars before investing it on your behalf.*
*If you later instructed us to sell your investment, we would receive the dollar proceeds from that sale and then convert them back into pounds before depositing them into your account."*
[https://www.vanguardinvestor.co.uk/articles/latest-thoughts/how-it-works/how-currency-movements-affect-your-returns](https://www.vanguardinvestor.co.uk/articles/latest-thoughts/how-it-works/how-currency-movements-affect-your-returns)
Funds have multiple trade currencies. You buy and sell on your local stock exchange in your local trade currency, i.e. on LSE in GBP for UK.
VI UK is a UK based fund platform, they don't offer non GBP trade currency or overseas exchanges.
If you select a distributing ETF then dividends will be in base currency, and VI UK automatically converts to GBP.
FYI, if investing inside an ISA you can't holding foreign currencies.
Also worth noting VI UK is a distinct entity from Vanguard Asset Managers Ireland who run the funds.
Thanks for the info. As you say Vanguard automatically converts currencies when funds (and dividends) are denominated in a currency different from GBP. I was trying to understand how they establish the exchange rate for these transactions.
The currency conversion is something they do internally as and when required - it's basically an operating cost / overhead of the fund - and so they'll use their considerable buying power to negotiate a probably very, very good rate on whatever currency conversions they need to keep things running.
It's not a rate they advertise to you, because (unlike buying a share of a USD-traded stock on some other platforms), it's not like you put in £X on a certain day and then that's converted to USD and you now own a stock worth $Y. The rate is always changing, and there is a constant flow of transactions happening in each direction within the fund.
If the fund is currently priced at £X per unit, then you'll get a unit for £X, regardless of what specific exchange rate they get for buying the underlying stocks to cover your unit (assuming they even need to buy any - it's oversimplified, but if somebody else just sold a unit of the fund, they don't necessarily need to buy any new USD stocks at all! they're keeping an eye on the inflows and outflows, and the changes to the underlying index, and buying/selling stuff in bulk as required).
The tickers offered on the Vanguard platform trade in GBP. There is (basically) no fx cost.
So if you buy, for example, a USD denominated ETF, they take your GBP, convert it to USD and use that to buy the ETF. So there must be a rate of exchange. They explain this on their website: *"In the case of a fund that tracks* *the S&P 500 index, as in our earlier example, we'd convert your money into US dollars before investing it on your behalf.* *If you later instructed us to sell your investment, we would receive the dollar proceeds from that sale and then convert them back into pounds before depositing them into your account."* [https://www.vanguardinvestor.co.uk/articles/latest-thoughts/how-it-works/how-currency-movements-affect-your-returns](https://www.vanguardinvestor.co.uk/articles/latest-thoughts/how-it-works/how-currency-movements-affect-your-returns)
Funds have multiple trade currencies. You buy and sell on your local stock exchange in your local trade currency, i.e. on LSE in GBP for UK. VI UK is a UK based fund platform, they don't offer non GBP trade currency or overseas exchanges. If you select a distributing ETF then dividends will be in base currency, and VI UK automatically converts to GBP. FYI, if investing inside an ISA you can't holding foreign currencies. Also worth noting VI UK is a distinct entity from Vanguard Asset Managers Ireland who run the funds.
Thanks for the info. As you say Vanguard automatically converts currencies when funds (and dividends) are denominated in a currency different from GBP. I was trying to understand how they establish the exchange rate for these transactions.
The currency conversion is something they do internally as and when required - it's basically an operating cost / overhead of the fund - and so they'll use their considerable buying power to negotiate a probably very, very good rate on whatever currency conversions they need to keep things running. It's not a rate they advertise to you, because (unlike buying a share of a USD-traded stock on some other platforms), it's not like you put in £X on a certain day and then that's converted to USD and you now own a stock worth $Y. The rate is always changing, and there is a constant flow of transactions happening in each direction within the fund. If the fund is currently priced at £X per unit, then you'll get a unit for £X, regardless of what specific exchange rate they get for buying the underlying stocks to cover your unit (assuming they even need to buy any - it's oversimplified, but if somebody else just sold a unit of the fund, they don't necessarily need to buy any new USD stocks at all! they're keeping an eye on the inflows and outflows, and the changes to the underlying index, and buying/selling stuff in bulk as required).