Credit Suisse To Change Tracking Method And Introduce Swap Charges

Last Updated: 1 June 2022

Credit Suisse has announced that it is changing the replication method used by four of its ETFs from synthetic to physical, effective from November 3. At the same time, the firm said it will also begin levying a swap-related charge on investors in its remaining synthetic funds.

The four ETFs that will be switching to physical replication are the MSCI Australia, MSCI Brazil, MSCI Mexico Capped and MSCI South Africa funds.

After the switch, there will be 12 remaining synthetic ETFs in the Credit Suisse range, with the rest of the company’s funds using physical replication. The issuer said it believes that physical replication provides a clear advantage to investors, giving them the benefits of transparency and quality.

The issuer’s synthetic ETF range was launched in August last year. At the time, Credit Suisse said: “In the case of more complex country indices such as individual emerging markets, it is often difficult, if not impossible, for investors to gain access to direct investments. Synthetic replication now allows less liquid indices to be replicated accurately and efficiently.”

The decision to levy a spread charge on the bank’s remaining synthetic ETFs reflects the passing on of costs incurred by the ETFs’ swap counterparty, according to the bank. These costs will be reflected in funds’ net asset values, said Credit Suisse, meaning that they will increase funds’ tracking error. The bank has not disclosed how much it expects to charge for swap provision, but said it will publish the information on its website in due course.

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