[A red circle appears with the red silhouette of a person inside it. Eight grey circles emerge, each with a different stock abbreviation inside: AAPL, GOOG, TSLA, AMZN, NFLX, JNJ, BAC, LVMH. The silhouette in the circle is replaced with a Canadian flag. The grey circles for APPL, GOOG, AMZN, JNJ, and BAC each flip over to show a solid red circle with a white maple leaf.]
If you’re like most investors, you want a healthy mix of blue-chip global companies in your portfolio. But chances are, if you’re Canadian, your portfolio is nowhere near as globally diverse as you’d like.
[The previous graphics move up and off the screen, and a pie chart in gray and red emerges from the bottom. The title above the pie chart reads, “Share of the global market” with a footnote that reads “Source: Global index weight reflected by country’s weight in the MSCI All Country World Index as of May 31, 2019. Investor holdings in domestic market sourced from the IMF, as of December 2014.” Grey makes up 96.9% of the pie chart, and red makes up 3.1%. A legend indicates that red represents Canada, and grey represents International. A second pie chart appears to the right, with the title, “Average Canadian geographic allocation.” Red makes up 59% of the chart, and grey makes up 41%.]
Canada only makes up 3% of the global market, but Canadians on average have 59% of their portfolio in Canadian investments.
[The screen fades out and a line graph fades in. The graph title reads, “Canadians are missing out.” The vertical axis of the graph is labelled, “Growth of $100,000.” It is marked up in $100,000 increments, from $100,000 to $500,000. The horizontal axis is marked by years: December 2009 through December 2019. Three lines emerge from the $100,000 mark on the horizontal axis. The dark red line is headed by a Canadian flag, and it shows the TSX 60 Index performance improving somewhat over time, ending with $203,685. The grey line is headed by a world map and shows the MSCI World performance resulting in $275,416. The red line is headed by a US flag, and shows the performance of S&P 500 resulting in $407,438. Graphic footnote reads, “Source: Bloomberg, as of November 26, 2020.”]
And because global markets have historically outperformed Canadian markets, this means that Canadian investors are potentially missing out.
[Why are we overly invested in Canada?]
Why are we overly invested in Canada?
[Foreign exchange]
Two words: foreign exchange.
[The words fade off screen. A graphic of a building emerges from the bottom that says “Currency exchange.” Next to the building is a sign showing 8 different national flags and numbers representing the values of their currencies. The sign grows to fill the middle of the screen, and the currency values move up and down to show the fluctuation of currency exchange rates.]
Every time you buy a global stock, you have to factor in the risk associated with fluctuations in the Canadian dollar exchange rate and associated conversion fees.
Enter CDRs.
[The letters CDR drop down to three different lines, and more letters appear to spell out the acronym: Canadian Depositary Receipts. A world map fades in, and 6 circles pop up, each with a different country’s flag: The US, Germany, the UK, France, Japan, and Australia. A world map zooms in on Canada, and the circles move to line up horizontally. The map zooms out slightly, and words appear to the right: “Get exposure to the world’s biggest companies in Canadian dollars.”]
CDRs, or Canadian Depositary Receipts, represent shares of global companies but are traded in Canadian dollars on a Canadian stock exchange — making it easy for you to get exposure to the world’s biggest companies.
[A red circle appears. Inside the circle is a report with the title, CDR. Three smaller circles emerge from the bottom, each linked to the main circle. The first has an icon of a bank, the second has a dollar sign, and the third has a ballot.]
CDRs are a lot like traditional stocks — they trade on an exchange, flow through dividends and have voting rights.
[The smaller circles retreat into the main circle. A dashed line appears in a ring around the circle. They converge and shrink into a smaller grey circle with the letters AAPL. The background becomes a line graph, showing the performance of the AAPL share alongside the value of US currency. It shows that AAPL performs well, and its performance is not tied to the US dollar.]
What makes CDRs special is the built-in notional currency hedge. This means your returns depend on the performance of the underlying shares, effectively eliminating currency fluctuations.
[The AAPL circle transforms into a red globe, which rotates as different pinpoints of cities blink on and off. A shield emerges from the globe and moves to the right, and a plus sign appears between them.]
Investing with CDRs can help provide greater diversification in your portfolio, while mitigating the additional risks associated with global investing.
[ CIBC logo. CDRs. Own the company, not the currency.]
CDRs. Own the company, not the currency.
The CIBC logo and “CIBC Capital Markets” are trademarks of CIBC, used under license. All other applicable trademarks are owned by their respective trademark owners.