OriginaveWhy your world ETF lags the S&P 500: the GBP/USD effect
Your fund earns returns in dollars. You live in pounds. Here is exactly what that costs — or pays — year by year.
A world tracker can gain 20% in US dollars and far less in pounds in the same year — or the other way round — purely because the exchange rate moved. Same fund, same companies, same year. Fund fact sheets headline the first number; your broker account shows the second.
This page shows that gap with real fund data instead of theory: the same index owned through a US-listed fund (returns in USD) and through its London GBP line (returns in pounds, the ones a British investor actually pockets).
MSCI World: the same index in USD and GBP
URTH is a US-listed MSCI World fund (returns in USD); SWDA is the iShares Core MSCI World GBP line on the London Stock Exchange. A negative gap means the sterling investor got less that year; a positive gap means the falling pound quietly boosted their return. Small fee and tracking differences between the two funds are a rounding error next to the currency swings.
| Year | In USD (URTH) | In GBP (SWDA) | Currency gap |
|---|---|---|---|
| 2026 (so far) | +9.81% | +10.56% | +0.75% |
| 2025 | +21.36% | +12.64% | -8.72% |
| 2024 | +18.66% | +21.11% | +2.45% |
| 2023 | +23.95% | +17.59% | -6.36% |
| 2022 | -17.97% | -8.33% | +9.63% |
| 2021 | +22.27% | +23.64% | +1.37% |
| 2020 | +15.78% | +12.25% | -3.54% |
| 2019 | +28.15% | +23.03% | -5.11% |
| 2018 | -8.56% | -3.78% | +4.78% |
| 2017 | +22.95% | +11.78% | -11.16% |
| 2016 | +7.31% | +29.59% | +22.28% |
| 2015 | -0.64% | +4.06% | +4.69% |
Where the gap comes from
A world ETF holds mostly American companies, priced in dollars. When you buy its GBP line in London, you effectively own dollars with extra steps: your return is the stocks' return plus whatever the dollar did against the pound. A year where US stocks gain 10% and the dollar loses 10% against the pound is, for you, a year of roughly zero.
The gap works both ways. In years when the dollar strengthens, it pads British investors' returns; in years when the pound rallies, it eats them. Over decades these swings have largely washed out — but any single year can be dominated by them, which is why your fund and the American headlines often disagree.
Currency is not the whole story, though. A world index is only about two-thirds US stocks — when Europe and Japan trail the US, a world tracker lags the S&P 500 in any currency. Currency explains USD-vs-GBP gaps for the same index; composition explains world-vs-US gaps. Our CSP1 vs SWDA comparison shows the composition effect in pounds, year by year.
S&P 500: the same 500 companies, two currencies
SPY is the original US-listed S&P 500 fund; CSP1 is the iShares Core S&P 500 GBP line on the London Stock Exchange. Identical index — the gap column is almost purely the GBP/USD exchange rate.
| Year | In USD (SPY) | In GBP (CSP1) | Currency gap |
|---|---|---|---|
| 2026 (so far) | +10.09% | +10.66% | +0.57% |
| 2025 | +17.72% | +9.37% | -8.35% |
| 2024 | +24.89% | +27.35% | +2.46% |
| 2023 | +26.18% | +19.79% | -6.39% |
| 2022 | -18.18% | -9.05% | +9.13% |
| 2021 | +28.73% | +31.07% | +2.34% |
| 2020 | +18.33% | +13.65% | -4.68% |
| 2019 | +31.22% | +26.42% | -4.80% |
| 2018 | -4.57% | +0.01% | +4.58% |
| 2017 | +21.71% | +10.83% | -10.87% |
| 2016 | +12.00% | +34.10% | +22.10% |
| 2015 | +1.23% | +5.78% | +4.54% |
Frequently asked
Why is my world ETF down when the S&P 500 is up?
Usually because of the currency, not the companies. A world ETF holds mostly US stocks that earn returns in dollars; your London line is priced in pounds. When the pound strengthens against the dollar, the same portfolio is worth fewer pounds. Headlines quote the USD number; your account shows the GBP one.
Which return will I actually get — the USD or the GBP one?
No single number is 'the' return — it depends on your currency. If you buy an ETF in pounds on the London Stock Exchange, the sterling return is the one you actually experience, regardless of what the USD fact sheet says. Every pound figure on this site is computed from the LSE GBP line's prices.
Does a currency-hedged ETF fix this?
A currency-hedged share class removes most of the GBP/USD swing, for a hedging cost that eats into returns. Hedging looks brilliant in years the pound rallies and wasteful in years it falls; over long horizons currency moves have historically washed out for equity investors, which is why most long-term investors hold unhedged funds. It's a preference about the ride, not a free lunch.
Is it always the currency's fault?
Not always. A world ETF is only about two-thirds US stocks — the rest is Europe, Japan and other markets. In years when non-US markets trail the US, a world tracker lags the S&P 500 in any currency. Currency explains the gap between the same index in USD and GBP; composition explains the gap between a world index and a US-only one.
Related reading: currency effect and total return in the glossary, or see every year's GBP outcome on the yearly performance dashboard.