KraneShares FTSE Emerging Markets Plus ETF (BATS:KEMP) launched as the first Emerging Markets GDP Weighted ETF in the U.S.(1) and the first Emerging Markets ETF to include Mainland Chinese Stocks (China A-Shares)(2)
NEW YORK, Feb. 17, 2015 /PRNewswire/ -- KraneShares, a New York based ETF company (www.kraneshares.com), has launched the KraneShares FTSE Emerging Markets Plus ETF (BATS:KEMP). KEMP is benchmarked to a FTSE index; a global provider of stock market indices. The fund is gross domestic product ("GDP") weighted and includes China A-Shares and China N-Shares. KEMP will have an overweight to China (48% total weight) and India (17% total weight); a 23% and 5% higher allocation than the FTSE Emerging Index, respectively3. KEMP's China investment universe includes China A-Shares – the best performing country equity market in 20144 – and China N-Shares – Alibaba, Baidu, JD.com and others. The FTSE Emerging Index does not include China A-Shares or N-Shares.
"We are excited to partner with KraneShares to launch a GDP weighted product," said Mark Makepeace CEO of FTSE. "Since its inception5, the FTSE Emerging GDP Weighted index has performed higher than its cap-weighted counterpart6. Attribution analysis shows that the primary contributing factor to the outperformance of the FTSE Emerging GDP Weighted Index over the period was the GDP Weighted index's overweight position in China.6"
"A GDP weighted investment approach directly aligns with KraneShares' investment philosophy as China's GDP is the second largest in the world7 and thus commands a larger total weight in our index vs market cap weighted emerging markets indices. We believe a complete China equity allocation – China A-Shares, N-Shares and Hong Kong listed shares – can deliver better returns and increased diversification vs most investors' China allocations which have been limited to Hong Kong listed Chinese companies," said Brendan Ahern, Chief Investment Officer of KraneShares. "Furthermore, KEMP will be the first U.S. listed ETF to purchase China A-Shares through the Shanghai-Hong Kong Stock Connect Program2, which launched last November and allows international investors to buy mainland China securities without needing a special quota."
"KraneShares FTSE Emerging Markets Plus ETF (KEMP) is a milestone for the ETF industry as the first U.S. ETF to offer Emerging Markets and China A-Share exposure,2" said Jonathan Krane, CEO of KraneShares. "KEMP may help investors increase and diversify their total portfolio allocation to China by including China A-Share and N-Share equities. We believe that China's capital markets will consistently outperform other emerging and developed markets over the next decade. Our goal is to develop innovative exchange traded funds to provide global investors with solutions to capitalize on the China investment opportunity. We are confident that KEMP will deliver an Emerging Markets ETF with a more sophisticated and robust China equity exposure."
About KraneShares:
KraneShares, a product of Krane Funds Advisors, is focused on serving global investors with ETFs for the next-wave of China's development. Founded in 2011, our New York based firm offers proprietary ETFs constructed to give US and global investors broad, diverse and quality exposure to China's historic growth story.
1.) From Bloomberg as of 1/31/2015 based on all ETFs in Bloomberg there are 4 ETFs that use a GDP weighted index or incorporate GDP as a factor in developing the index. There are no emerging market ETFs in the list.
2.) From Bloomberg as of 1/31/2015 based on all ETFs in Bloomberg there are 93 ETFs that have emerging market exposure stated in their investment objective. None of the ETFs state that they access China A Shares. If there are no China A Shares included in the emerging markets ETFs then by default they do not participate in the Shanghai-Hong Kong Stock Connect Program
3.) Data from Bloomberg as of 1/31/2015
4.) From Bloomberg as of 1/31/2015 based on a comparison between every country in the FTSE Emerging Market Index and FTSE Developed Index (global equity) and the FTSE China A Index.
5.) The FTSE Emerging GDP Weighted Index was incepted on 9/17/2013
6.) Source data from Bloomberg and the IMF since inception of the FTSE Emerging GDP Weighted Index 9/17/2013 through 12/31/2014
7.) Data from the World bank for the year 2013 as of 12/16/2014
Carefully consider the Funds' investment objectives, risk factors, charges and expenses before investing. This and additional information can be found in the Funds' prospectus, which may be obtained here: http://kraneshares.com/resources/kraneshares_kemp_prospectus_2015.pdf
Read the prospectus carefully before investing.
Investing involves risk, including possible loss of principal. There can be no assurance that a Fund will achieve its stated objectives. The Funds focus their investments primarily with Chinese issuers and issuers with economic ties to China. The Funds are subject to political, social or economic instability within China which may cause decline in value. Fluctuations in currency of foreign countries may have an adverse effect to domestic currency values. Emerging markets involve heightened risk related to the same factors as well as increase volatility and lower trading volume. Current and future holdings are subject to risk.
Narrowly focused investments and investments in smaller companies typically exhibit higher volatility. Internet companies are subject to rapid changes in technology, worldwide competition, rapid obsolescence of products and services, loss of patent protections, evolving industry standards and frequent new product productions. Such changes may have an adverse impact on performance.
The ability of the KraneShares FTSE Emerging Markets Plus ETF to achieve its investment objective is dependent, in part, on the continuous availability of A Shares through the Fund's investment in the KraneShares Bosera MSCI China A Share ETF and that fund's continued access to the China A Shares market. If such access is lost or becomes inadequate to meet its investment needs, it may have a material adverse effect on the ability of the Fund to achieve its investment objective because shares of the KraneShares Bosera MSCI China A Share ETF may no longer be available for investment by the Fund, may trade at a premium to NAV, or may no longer be a suitable investment for the Fund.
The KraneShares FTSE Emerging Markets Plus ETF and KraneShares Bosera MSCI China A Share ETF may be concentrated in the financial services sector. Those companies may be adversely impacted by many factors, including, government regulations, economic conditions, credit rating downgrades, changes in interest rates, and decreased liquidity in credit markets. This sector has experienced significant losses in the recent past, and the impact of more stringent capital requirements and of recent or future regulation on any individual financial company or on the sector as a whole cannot be predicted. These ETFs may also invest in derivatives. Investments in derivatives, including swap contracts and index futures in particular, may pose risks in addition to those associated with investing directly in securities or other investments, including illiquidity of the derivatives, imperfect correlations with underlying investments, lack of availability and counterparty risk. The use of swap agreements entails certain risks, which may be different from, and possibly greater than, the risks associated with investing directly in the underlying asset.
KEMP invests in variable-interest entities (VIEs), which are investments in foreign-domiciled American Depository Receipts (ADRs). Rather than owning Chinese-domiciled entities, the VIEs have contractual arrangements designed to provide the economic benefits related to certain Chinese-domiciled companies. The structure of VIEs presents some unique risks that should be considered.
VIE structures do not give investors ownership in the operating company, as stock does. With a VIE, an investor has no direct claim on the core, restricted business assets of the VIE operating company. As a result, investors may not exert as much influence over the subject company as they could if they were owners of common stock. Often, the voting rights in the VIE operating company, especially in matters of corporate governance, are controlled by the principals who established the VIE operating company.
The KraneShares ETFs are distributed by SEI Investments Distribution Company, 1 Freedom Valley Drive, Oaks, PA 19456, which is not affiliated with Krane Funds Advisors, LLC, the Investment Adviser for the Fund.
SOURCE KraneShares
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