The iShares Core U.S. Aggregate Bond ETF (AGG) the Bloomberg U.S. Aggregate Bond Index, providing broad exposure to the entire US investment-grade bond market; including US Treasuries, agency mortgage-backed securities (MBS), and corporate bonds.
However, for long-term Indian investors, AGG carries a critical structural risk: The US Estate Tax. If you hold US-domiciled assets (like AGG) and your portfolio value exceeds $60,000, the US government levies a 40% Estate Tax on the excess amount upon your death. This creates an unnecessary risk that can wipe out nearly half of the wealth intended for your heirs.
This blog gives you all the information you need about the top UCITS alternatives. These alternatives have similar underlying assets and track the same (or broader) indices, providing similar growth without the risk of the US Estate Tax.
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Why Indians are looking for UCITS alternatives to AGG
Indian investors are shifting to UCITS alternatives because they solve the tax risks and inefficiencies of US ETFs like AGG while providing the exact same exposure.
- Estate Tax Protection: UCITS funds are typically domiciled in Ireland. They are not considered "US-situs" assets, meaning they are 100% exempt from the 40% US Estate Tax.
- Tax Deferral (Accumulation): Unlike AGG, which forces taxable cash dividends on you every month, many UCITS funds offer "Accumulating" classes that reinvest interest income automatically. This reduces your tax liability in India and defers it until you sell the fund.
To learn more about UCITS ETFs and why Indian investors are choosing them, read our guide on UCITS ETFs.
Popular UCITS Alternatives for AGG
Here are the top three UCITS funds that serve as the best proxies for US Bond exposure.
1. iShares US Aggregate Bond UCITS ETF
This is the official European equivalent of AGG, managed by the same provider (BlackRock/iShares). It tracks the exact same index (Bloomberg US Aggregate Bond Index), holding the same mix of US Treasuries, MBS, and Corporate bonds.
It is the most direct substitute available. For long-term investors, the Accumulating (Acc) version is superior as it automatically reinvests coupon payments and reduces your overall tax liability.
- Ticker: IUAA (Acc) / IUAG (Dist) (LSE)
- Total Expense Ratio (TER): 0.25%
- Structure: Available in both Distributing and Accumulating
- Top Holdings: US Treasuries, FNMA MBS, US Corporate Bonds.
2. iShares Core Global Aggregate Bond UCITS ETF
AGGU tracks the Bloomberg Global Aggregate Bond Index instead of focusing only on the US
This gives you exposure to the US bond market (which is still ~40-50% of the fund) but diversifies you into government and corporate bonds from Europe, Japan, and other developed markets. It is significantly cheaper than the US-only version and offers broader diversification.
- Ticker: AGGU (LSE)
- Total Expense Ratio (TER): 0.10%
- Structure: Accumulating (Reinvests dividends)
- Top Holdings: US Treasuries, Japanese Govt Bonds, French Govt Bonds, Germany Bunds.
3. Vanguard USD Treasury Bond UCITS ETF
For investors who hold AGG primarily for safety and want to avoid corporate credit risk entirely, this Vanguard fund is the optimal choice. It tracks the Bloomberg Global Aggregate US Treasury Float Adjusted Index, holding only US Government debt.
It is the Cost Leader with an expense ratio of just 0.07%.
- Ticker: VUTY (Dist) (LSE)
- Total Expense Ratio (TER): 0.07%
- Structure: Available in both Distributing and Accumulating
- Top Holdings: 100% US Treasury Bonds.
Invest in UCITS ETFs with Paasa
Paasa is a global investing platform designed for Indian investors. We provide direct access to over 10 global exchanges, including the United States, United Kingdom, Switzerland, Hong Kong, Germany, France, Canada, Netherlands, Japan, and Singapore.
This means you are not restricted to just US ETFs like the QQQ; you can also buy tax-efficient UCITS equivalents using Paasa.
The Compliance Advantage
Paasa makes global investing easy and also removes the compliance friction with a specialized layer built specifically for Indian residents:
- Schedule FA Reporting: Exact reports you need for your Indian tax returns, eliminating the need for manual calculations.
- Tax Filing & Advice: Access to expert tax advice and seamless filing support.
- FEMA & LRS Integration: Guidance on FEMA regulations and LRS limits to ensure compliance.
Paasa also provides access to managed strategies, along with remittance, FEMA and tax advisory.
Disclaimer
This article is intended for information only and does not constitute investment or tax advice. Investing in global markets entails risks, including currency risk, political risk, and market volatility. Please seek advice from qualified financial and tax professionals before acting.
