ADRs and ETFs: Everything You Need to Know
April 6th, 2010 at 12:00pm by Tom Lydon
Exchange traded fund (ETF) investors may gain exposure to a variety of different themes, such as developed countries, emerging markets, frontier markets and even actively managed strategies, through American depositary receipts (ADRs) options. But wait, what are ADRs?
Simply put, ADRs are stocks that trade on a U.S. exchange and represent a fixed amount of shares in a U.S. corporation. Similar to ADRs are global depositary receipts (GDRs), which are issued in more than one country, writes Paul Weisbruch for TheStreet. As a way to simplify currency changes, ADRs were introduced to investors interested in purchasing shares of a company based in a foreign country – ADRs are denominated in U.S. dollars.
If you want diversified exposure to ADRs, look no further than the ETF industry
Developed Markets. Index providers rate countries on a different set of criteria but an investor will see a replication of some standard countries listed, like the United Kingdom, Switzerland, Japan, Australia, France and Germany.
- PowerShares BLDRS Developed Markets 100 ADR Index Fund (NASDAQ: ADRD). ADRD tries to reflect the BNY Mellon Developed Markets 100 ADR Index and has exposure to United Kingdom, Japan, Switzerland, France, Spain, Germany, Australia, Netherlands, Italy and more.
- PowerShares BLDRS Europe 100 ADR Index Fund (NASDAQ: ADRU). ADRU tries to reflect the BLDRS Europe 100 ADR Index, and owns ADRs from the United Kingdom, Switzerland, France, Spain, Germany, Netherlands, Italy, Finland and Israel.
- Claymore/BNY Mellon Equal Weighted Euro-Pacific Leaders (NYSEArca: EEN). EEN includes ADRs and GDRs in the United Kingdom, Japan, New Zealand, Switzerland, France, Germany, Ireland, Australia, Spain, and Israel. EEN varies from ADRD and ADRU with its equal-weighted methodology.
- RevenueShares ADR Fund (NYSEArca: RTR). RTR tries to reflect the S&P ADR Index and has EAFE exposure as well as exposure to Canada, South America and China.
- PowerShares BLDRS Asia 50 ADR Index (NASDAQ: ADRA). ADRA tries to reflect the BNY Mellon Asia 50 ADR Index and includes both emerging and developed markets, with exposure to Japan, Australia, China, South Korea, India, Taiwan, Hong Kong, Indonesia, and the Philippines.
- PowerShares BLDRS Emerging Markets 50 ADR Index (NASDAQ: ADRE). ADRE tries to reflect the BNY Mellon Emerging Markets 50 ADR Index and includes Brazil, China, South Korea, India, Mexico, Taiwan, Hong Kong, South Africa, and Russia.
- Claymore/BNY Mellon BRIC (NYSEArca: EEB). EEB is one of the many ADR options in the BRICs space. The fund tries to reflect the BNY Mellon BRIC Select ADR Index and offers exposure to Brazil, China, India, and Russia.
Frontier Markets. Frontier markets are usually categorized as having lower market capitalization and less liquidity than the developed/emerging markets. The FTSE and MSCI index providers classify countries like Albania, Croatia, Bulgaria, Nigeria, Kenya, Slovenia, Vietnam, Romania, and Argentina as frontier markets. [Africa ETFs: 5 Plays for a Growing Economy.]
- Claymore/BNY Mellon Frontier Markets (NYSEArca: FRN). FRN includes exposure to the standard frontier market fare, but also includes Chile, Egypt, Poland, and Colombia, which some providers perceive as emerging markets.
Actively Managed. AdvisorShares is planning to launch an actively managed ADR strategy ETF named WCM/BNY Mellon Focused Growth ADR ETF, with the symbol AADR. The ETF will be managed by sub-advisor WCM Investment Management. AADR will try to exceed returns of the BNY Mellon Classic ADR Index and MSCI EAFE. [Active ETFs: A Slam Dunk?']
Paul Weisbruch is vice president of ETF/Index Sales/Trading at Street One Financial.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.