CANADIAN DEPOSITARY RECEIPTS (CDRs)

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[A woman appears on screen. On-screen text: “Canadian Depositary Receipts”]

Canadian Depositary Receipts or CDRs let you get exposure to global stocks in Canadian dollars.

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[A world map with stock numbers appears on screen.]

Why does that matter? Well, there are any number of economic factors that can affect the exchange rate.

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[A graph representing stock fluctuation appears on screen. On-screen text: “Inherent Currency Risk”]

If you are a Canadian investor or someone interested in investing in global companies, these fluctuations don’t just make it hard to calculate the all-in cost of a stock, they also pose an inherent currency risk.

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[A graphic showing stock performance appears on screen.]

That’s because your returns are tied to both the performance of the company and the movement of the exchange rate.

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[A graphic showing CDR performance appears on screen. On-screen text: “Notional Currency Hedge”]

CDRs on the other hand mitigate your exposure to these exchange rate fluctuations through something called a Notional Currency Hedge.

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Sounds complicated, but it’s actually pretty straightforward once you understand how CDRs work.

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[A graphic representing the CDR ratio appears on screen.]

Each CDR represents ownership of a variable number of shares in a given company. That number is known as the CDR ratio.

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[On-screen text: “Adjusted in response to the Canadian dollar”]

Every day, the CDR ratio is adjusted in response to the performance of the Canadian dollar.

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[A graphic showing how the CDR ratio increases and decreases based on the Canadian dollar appears on screen.]

For example, if the Canadian dollar appreciates, the CDR ratio goes up and the number of shares increases. If the Canadian dollar depreciates, the CDR ratio goes down and the number of shares decreases.

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[A graphic that is tracking investment performance appears on screen.]

The goal? To track the performance of the underlying stock as closely as possible and limit your foreign exchange risk.

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There’s another key benefit. This fractional ownership structure means the cost of entry is potentially much lower.

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While some blue chip global stocks sell for hundreds or even thousands of dollars for one share, you can buy a single CDR for a fraction of that cost.

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In almost all other ways, CDRs behave just like regular stocks.

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[A graphic appears on screen showing how CDRs behave like regular stocks. On-screen text: “Registered account”]

They can be held in registered accounts such as RRSPs and TFSAs.

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[On-screen text: “Pays dividends”]

And if the underlying stock pays dividends, its CDR equivalent will pay dividends too.

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[On-screen text: “What about fees?”]

And what about fees?

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[On-screen text: “No ongoing management fees” “Currency hedge management cost”]

CDRs do not have any ongoing management fees. There’s only a cost applied to the FX forward rate that’s used to manage the notional currency hedge.

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In volatile currency markets, it can be hard to know how your cross-border investments are truly performing. Which can lead many investors to exclude top global companies from their portfolios.

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[On-screen text: “Easy to get exposure to global companies while mitigating the FX risk”]

With CDRs, you get a clear view that makes it easy to get exposure to global companies while mitigating your exposure to FX risk.

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[On-screen text: “cdr.cibc.com”]

Find CDRs on the trading platform of your choice or go to cdr.cibc.com (opens in a new tab) to learn more.