hiriskpaul wrote:There is a way to reduce the WHT cost, but it introduces some credit risk. An ETF provider can invest in a portfolio of stocks paying zero to low dividends, then enter into a swap agreement with a bank. The agreement would be such that the bank pays the ETF the total return on the S&P 500 and the ETF pays the bank the return on the stocks portfolio, plus a fee. As the stocks portfolio pays next to nothing in dividends next to no WHT is paid.
iShares I500 is such an example and has beaten the conventional iShares S&P 500 ETF CSP1 by the amount you would expect it to since launch. There are other examples, eg Invesco have been running something similar for longer than iShares and has also beaten conventional ETFs.
Checking Invesco's version and I see that as tracking the S&P500 total return less 15% US dividend withholding tax. Outside of ISA/SIPP and that would exclude being able to offset US withholding tax against UK income taxation.
Data : S&P500 gross total return, S&P500 price only return, Invesco ETF total return
2014 , 13.69 , 11.39 , 13.2
2015 , 1.38 , -0.73 , 1.01
2016 , 11.96 , 9.54 , 11.54
2017 , 21.83 , 19.42 , 21.41
2018 , -4.38 , -6.24 , -4.47
2019 , 31.49 , 28.88 , 31.37
2020 , 18.4 , 16.26 , 18.3
2021 , 28.71 , 26.89 , 28.64
2022 , -18.11 , -19.44 , -18.17
2023 , 26.39 , 24.23 , 26.13