Identifier: C6T6L1 | Revision: 2026-10-26 | Planned study: 10–15 minutes, excluding extended practice.

Decision and objectives

Decision: Compare common exposure on full net cash and liability stress; domestic access does not automatically hedge currency. Objectives: Normalize domestic and foreign routes to one liability; Reconcile embedded and investor costs; Choose a route or baseline under currency stress. Prerequisite: C6T5L5.

All numerical offers, rates, prices, account chains, fees and contract parameters below are hypothetical, unless a primary document is expressly identified. They are not current executable offers or evidence that a Turkey-resident investor can access them. The assumed investor is a Turkey-resident individual outside a business, with no assumed US citizenship or tax residence; actual classification must be checked. Results are before actual tax unless a fictional tax schedule is explicitly supplied. No account, deposit or trade is required.

Mechanics

A domestic fund holding foreign assets and a foreign ETF can carry similar market and currency risk through different claims and access chains. Compare the economic reference, base currency, horizon and spending objective first. Domestic access does not mean domestic economic exposure. A foreign listing does not improve diversification when its underlying portfolio duplicates assets already held. The comparison needs both the asset record and the investor’s dealing/custody record.

Price and return drivers

Use the same initial budget and cash dates. Identify which costs are embedded in fund returns and which arise from investor transfers, trades, custody and withdrawals. A favorable base-case net value does not establish that the route meets a liability under stress. Preserve a cash baseline and identify permissions, documents and settlement requirements independently of the arithmetic. Do not rank a route solely on expense ratio or commission.

Worked case

Harbor committee has TRY 100000 for one year, common unhedged foreign equity exposure, initial FX 33 TRY/USD, underlying USD return 8%, final FX 34. Domestic fund A represents USD 100000/33 = 3030.30303. Its synthetic embedded expense 1200 TRY is already reflected in final NAV: 100000/33 × 1.08 × 34 − 1200 = 110072.7273. Redemption charge 100 leaves 109972.7273. Foreign route B pays initial transfer/trade costs 1000 TRY, investing 99000/33 = USD 3000. Published net asset return produces 3240; custody/sale charges 20 leave 3220. Convert at 34 and pay withdrawal charge 200: final TRY 109280. A exceeds B by 692.7273 under these inputs, before actual tax.

Adverse case

Final FX 30, 34 and 38 gives A TRY 96881.8182, 109972.7273 and 123063.6364; B 96400, 109280 and 122160. Both miss Harbor’s mandatory TRY 100000 liability in the 30 state. The domestic wrapper did not remove currency risk. An earlier exit also requires an actual fund redemption calendar or exchange bid and transfer calendar; the one-year values cannot be treated as spendable cash earlier. These are conditional comparisons, not current TEFAS or foreign ETF observations.

Practical use

Complete both cards with the exact legal entity, unit/class identifier, underlying holdings, hedge policy, embedded costs, investor charges and cash dates. Verify authorized access and custody separately. The same economic exposure can have different investor tax records and recovery processes. Include the quoted spread, commission, funding, custody, conversion and exit charges applicable to the actual route. Check investor residence/status, acquisition and income dates, effective tax rules and treaty scope before applying any actual tax; these cases remain before actual tax.

Decision boundaries

A wins the supplied base-case cost comparison only if both routes have acceptable access and settlement evidence. For the rigid liability, decline both unhedged allocations if the 30 state is within the required stress and no affordable hedge closes the gap. Retain a matching baseline or invest only surplus capital. A justified rejection follows the objective rather than denying the possible use of foreign assets for other horizons.

Practice and references

Exercise: same Harbor inputs, final FX 32. Solution: A = 100000/33 × 1.08 × 32 − 1300 = 103427.2727 TRY. B = 3220 × 32 − 200 = 102840. A is 587.2727 higher. Passing one state does not repair the 30 state or create a guarantee.

Takeaway: Compare common exposure on full net cash and liability stress; domestic access does not automatically hedge currency. References: product card, formula; glossary: Access route comparison; Common exposure; Baseline. Next: C6T6L2. Topic test.

Sources: SEC: Using BrokerCheck (retrieved 2026-10-26; Registration and disciplinary history). GIB: Investment Income Guide (retrieved 2026-10-26; Introduction and foreign income/reporting framework). SEC: Exchange Traded Funds (retrieved 2026-10-26; Structure, price and NAV). Revision: 2026-10-26; recheck changeable rules before publication.

Shared reference guide