Whitepaper
Investing Abroad: Weighing the Decision Between Foreign Ordinaries and ADRs
April 6, 2023
Investing outside of one’s home country is an effective and common way to diversify a portfolio. But it requires investors to make an important choice between foreign ordinary shares or American Depository Receipts (ADRs). While both securities share the same foreign company risk, there are some key differences between the two.
In this paper, we work to clarify the implications of each choice in the context of a Parametric Custom Core® portfolio benchmarked against the MSCI EAFE Index. This paper covers:
- How imperfect coverage and mismatched trading hours can increase tracking error
- How foreign ordinaries and ADRs create different costs and complexities
- How international equity ETFs and their underlying indexes generate different returns
