Hi All,
Hoping for a bit of advice if anyone has looked into this before. I've been looking into investing into a UK ISA available ETF that tracks the Nasdaq100, i.e. UK equivalent of the US available QQQ fund.
I understand that the long term variance between the funds is theoretically due to a) the charge on the iShares ETF is slightly higher than the QQQ, and b) that the iShares ETF will have a small amount of tax deducted on divs which are being reinvested (and a very small variance due to minor tracking errors).
Over the long term the two indexes perform similarly. However on a daily and weekly timeframe there is a big disconnect in performance between the two. Given I'm looking at the USD priced equivalent the answer is not in fx.
Is it perhaps because of the trading cut off times of the two etfs? I.e. for last Friday the iShares LSE exchange traded ETF closed at 16:35 at a closing price of 803.59, and at that time the NASDAQ EFT was trading at 346.28. Between 16:35 and 20:45 the NASDAQ remained open and therefore put in a further advance of 1.7% during that time. I believe we therefore have a cut off lag, where 4hours of the Nasdaq performance each day is reflected in the UK ETF a day later and the UK ETF gaps on the open accordingly. I am therefore expecting a gap up on the iShares ETF by 1.7% come Monday morning?
During normal trading hours the UK ETF must be a mirror of the US ETF, and there cannot be a time lag during normal hours otherwise there would be too obvious arbitrage opportunities. However I do not understand why the UK ETF has price movement during the early hours of the UK trading day when the NASDAQ is closed. Perhaps although the UK iShares ETF is trying it's best to track the NASDAQ it is having to continually rebalance it's trading volume, and it is the trading volume profiles between the two funds that cause some of the short term performance variances.
If my suspicion is correct at least on the 4hrs timing lag, then caution is required. Say for example the 1.7% is actually a downtrend that occurs between 16:35 and 20:45, I would effectively be locked…
