KraneShares Introduces New Emerging Market ETF

Niche ETF provider KraneShares is well-known for its cutting edge China-based indexes that provide unique exposure to a wide range of asset classes.   More recently, they expanded their lineup to include a more diversified emerging market ETF with a fundamental spin on its country allocation.

The KraneShares FTSE Emerging Markets Plus ETF (KEMP) is the first ETF of its kind to use a gross domestic product (GDP) weighting system as the primary driver of index construction.  In addition, this ETF will feature exposure to China A share and N share securities, which have recently become an attractive opportunity for emerging market investors.  

A-shares are listed on the Shanghai or Shenzhen stock exchanges and for many years were only available to main-land Chinese investors.  N shares are Chinese equities listed on the NASDAQ or New York stock exchanges.   

More established ETFs in this space, such as the Vanguard FTSE Emerging Market ETF (VWO), use a traditional market-cap oriented strategy to assemble their underlying portfolio.  In addition, VWO does not include any direct exposure to China A share stocks.

The end result in KEMP is far greater exposure to countries with the largest GDP such as China and India.  In fact, China makes up 48 percent of the total asset allocation of this ETF, while India represents 17 percent. 

As noted in the press release, “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.

KEMP will trade on the BATS exchange and feature a net expense ratio of 0.68 percent annually. 

This new ETF will join the successful KraneShares CSI China Internet ETF (KWEB), which has amassed over $175 million in assets.  KWEB tracks a portfolio of 53 Chinese stocks engaged in e-commerce or internet related technology.  This includes the ubiquitous Alibaba Holding Group Limited (BABA), which is in the top three holdings.