UK or US investors wanting to buy shares listed in emerging market countries like Russia can face a tough time when there are government restrictions on who can own and trade them. Global depositary receipts (or GDRs) offer a solution.
Instead of trying to buy the share in its local market, the investor – typically UK or US – buys a depositary receipt, which represents the shares, instead. These are issued by investment banks, listed in the investor’s home market and traded separately from the underlying share.
Apart from easier access, the key advantages of global depositary receipts include the fact they are priced in the investor’s home currency (typically US dollars), carry lower dealing costs and pay more timely dividends, again in dollars, than the shares they represent. Whilst similar in most respects to American depositary receipts, GDRs tend to be listed in European markets like the London Stock Exchange whereas ADRs are more heavily traded in the US market.
• See Tim Bennett’s video tutorial: Depository receipts: An easy way to invest in foreign firms.