The ABCs of ADRs in ETFs
December 24th at 2:00pm by Tom Lydon
What benefits does an exchange traded fund (ETF) that is a basket full of ADRs have to offer? Carl Delfeld for ETFXRAY explains the ADRs are denominated in U.S. dollars, with the underlying security held by a U.S. financial institution overseas. Leading sponsors of ADRs include JP Morgan and The Bank of New York. The advantages of ADRs for investors are convenience and cost. It gives investors access to an easy and cost-effective method of buying shares in a foreign country. There are no administration costs nor foreign taxes on each transaction.
By buying and selling ADRs on the U.S. market, the trade will clear and settle in U.S. dollars and the bank will convert any dividends or cash payments before sending them to you.
ADRs do not avert currency and economic risk that come with investing in a foreign country.
