Precidian Investments Launches Hedged ADRs

By Laura Matthews

NEW YORK (Reuters) – Precidian Investments launched hedged ADRs on Monday that U.S. investors can use to buy foreign-listed stocks while limiting the impact of fluctuating currencies.

Precidian, an exchange-traded fund developer, announced it will list the hedged American Depositary Receipts on Cboe’s U.S. equities exchange.

Investors buying shares of companies overseas, including ADRs, are exposed to fluctuating exchange rates between the dollar and the foreign currency. However, by coupling the ADRs with a currency overlay into one security, investors can mitigate currency exposure, according to Cboe.

The Canadian Imperial Bank of Commerce will serve as the counterparty providing the currency hedge.

Rob Marrocco, global head of ETP listings at Cboe, stated, “This really is the next generation ADR for U.S. investors.” The product will be known as ADRhedged.

Cboe’s U.S. equities exchange will initially list AstraZeneca (NASDAQ:AZN) ADRhedged, HSBC Holdings (NYSE:HSBC) ADRhedged, and Shell (LON:SHEL) ADRhedged, with plans to add another 14 shortly after.

Stuart Thomas, founding principal at Precidian, remarked that the more than $1 trillion ADR market has needed a hedged alternative for decades.

According to Cboe, ADRhedged comes at a time when the greenback’s strength against most global currencies over the past decade has caused ADR investments to underperform in dollar terms.

“People have been buying them for years, but the average investor has not had access to a currency hedge overlay for international investing,” Thomas said. “Now you’ve got another set of tools at your disposal.”