Unsponsored DR demand surges as investors seek European equities

Number of new unsponsored programs rose 50 percent last year, with emphasis on UK equities, BNY Mellon says

Demand for new unsponsored DR programs has surged in the past year or so as investors, particularly fund managers in the US, seek greater exposure to European equities through dollar-denominated securities, according to custodian bank BNY Mellon.

The number of new unsponsored DR programs surged to 93 last year, a 50 percent increase on the 62 programs created in 2012, BNY Mellon says in an emailed statement. ‘Strong investor appetite for western European companies has fueled the rapid growth for unsponsored programs, which are now at their highest level in the last five years,’ BNY Mellon says.

Foreign investors have shown particular interest in UK equities, which accounted for almost a third of unsponsored DR programs – or those without involvement of the underlying company – in western Europe last year, the bank says, while retailers account for 17 percent of the new programs, outshining other sectors.

BNY Mellon’s Europe ADR Index outperformed the broader ADR Index in the first five months of this year, led by strong gains in the utilities sector, which rose 15.2 percent. The healthcare sector came next, at 12.2 percent, followed by oil & gas, with a gain of 11.6 percent.

QIWI led individual gainers in May, rising 46 percent in the month, followed by RedHill Biopharma, which rose 16.8 percent, and the InterContinental Hotels Group, which came in third with an increase of 15.6 percent. Three of the world’s top five gainers were also from Europe, according to data posted on BNY Mellon’s website.

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