Why invest using ADRHs?
Global Diversification is important
Savvy investors are well aware of the benefits of global investing. One of the primary ways that Americans invest beyond their borders is through American Depositary Receipts (ADRs). ADRs are a 100-year-old financial innovation that provide a simple way for investors to access shares of global blue-chip companies like Toyota Motor.
Embedded currency hedge mitigates exchange rate risk
What many American investors may not realize is that even though ADRs (i.e., Toyota Motor) trade in US Dollars, they come with an additional risk – fluctuations in foreign currency (i.e., Yen). For example, the Toyota Motor ADR provides investors with exposure to: (1) the performance of the Toyota Motor shares on the Nikkei Stock Exchange; PLUS (2) the performance of the Yen (vs. the US Dollar). Providing a currency hedge mitigates investors exchange rate risk.
Cost-effective and easy to access for all investors
Until now, currency hedging programs have, by and large, only been accessible to sophisticated institutional investors. ADRHs are exchanged-traded and as such can be bought or sold like any other exchange traded security. Therefore, ADRHs give all investors simple and cost-effective access to the world’s largest companies while mitigating exchange rate risk.
Global expansion of a proven investment
The currency-hedge for ADRhedgedTM Securities (ADRH) is provided by CIBC. In 2021, Canadian Imperial Bank of Commerce (CIBC) pioneered currency-hedged Canadian Depositary Receipts (CDRs). Investor adoption has been strong and there are over 60 CDRs listed in Canada with more than $50billion in assets traded since their creation.
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