The big advantage of CDRs is that you can buy them in Canadian dollars, which spares you from paying the steep foreign exchange costs that brokers charge for converting your loonies into greenbacks. CDRs are also currency-hedged, which means the value of your investment should be insulated, at least to an extent, from fluctuations in the Canada-U.S. exchange rate.
With Nvidia CDRs, on the other hand, you could put virtually all of your money to work. That same $2,000 would buy 26 Nvidia CDRs based on Friday’s trading price of about $76.50 on the NEO Exchange, leaving you with just a few dollars of idle cash .. Other CDRs – CIBC World Markets offers more than 50 of them – have also underperformed their U.S.-listed counterparts. Amazon.com’s CDRs, for example, gained 5.9 per cent over the same two-year period, compared with 10.7 per cent for the U.S.-listed shares. Microsoft CDRs rose 32.1 per cent, compared with 36.5 per cent for the shares.Why don’t the CDRs keep up with the shares? One reason is that currency hedging isn’t free.
“Furthermore, tracking difference between the price performance of a series of CDRs and the price performance of the applicable underlying shares may arise for a number of reasons,” it said. These include differences between Canadian and U.S. short-term interest rates and the level of currency and equity volatility.