Transcript: CDRs — Global investing, made for Canadians

[A woman appears.]

[Canadian Depositary Receipts]

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

[A world map with stock numbers.]

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

[A graph representing stock fluctuation.]

[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.

[A graphic showing stock performance.]

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

[A graphic showing CDR performance.]

[Notional Currency Hedge]

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

[The woman appears.]

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

[A graphic representing the CDR ratio.]

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

CIBC Capital Markets CDR In-Depth

[Adjusted in response to the Canadian dollar]

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

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

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.

[A graphic that is tracking investment performance.]

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

[The woman appears.]

[Another key benefit]

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

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.

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

[A graphic showing how CDRs behave like regular stocks.]

[Registered account]

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

[Pays dividends]

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

[What about fees?]

And what about fees?

[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.

[The woman appears.]

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.

[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.

[cdr.cibc.com]

Find CDRs on the trading platform of your choice or go to cdr.cibc.com to learn more.