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Canadian Stock Traders Lose Out With Currency-Hedged Receipts

  • CIBC debuted Canadian depositary receipts about a year ago
  • Hedging cost, greenback’s strength sapped their returns
Pedestrians pass in front of the Toronto Stock Exchange.

Pedestrians pass in front of the Toronto Stock Exchange.

Photographer: Cole Burston/Bloomberg

Canadian stock investors who embraced a unique kind of depositary receipt that hedges against currency fluctuations ended up losing out because of the greenback’s gains.

The securities from Canadian Imperial Bank of Commerce debuted about a year ago with a novel offer -- the chance for Canadians to buy US equities without having to convert their loonies to US dollars or worry about exchange-rate risk. Instead, the depositary receipts came with annual costs of as high as 0.6% that protected against US dollar weakness. As luck would have it, that worked against investors given the loonie’s 2.9% slump since the securities were issued in July 2021.