KraneShares, the issuer of U.S.-listed China exchange traded funds, and China’s E Fund Management are partnering to launch a new fixed income ETF.
The new ETF will trade in the U.S. Madison Marriage of the Financial Times broke the news Sunday.
E Fund Management, one of China’s largest asset managers is mulling partnerships with other U.S.-based fund managers and is also considering opening a U.S. office, the Financial Times reported. The KraneShares/E Fund ETF is expected to focus on corporate debt issued by Chinese state-run companies, according to the FT.
U.S. investors can currently access Chinese debt via the PowerShares Chinese Yuan Dim Sum Bond Portfolio (NYSEArca: DSUM) and the Market Vectors Renminbi Bond ETF (NYSEArca: CHLC), among other offerings.
Dim sum bonds, named after the bit-sized Chinese dish popular in Cantonese restaurants, are Chinese yuan-denominated debt issued by international corporations or entities. Additionally, yuan-denominated securities help limit U.S. investors’ exposure to interest rate risk at home. The dim sum bonds move in response to shifts in China’s rates. [Use Dim Sum ETFs for Fixed Income Diversity]
KraneShares brought its first ETFs to market just over a year ago, but the firm has quickly become recognizable due to the popularity of its KraneShares CSI China Internet Fund (NasdaqGM: KWEB). KWEB has become a favorite ETF of traders and investors looking to gain exposure to a broad swath of high-flying Chinese Internet stocks. [ETFs for a VIP of Internet Stocks]
KraneShares also sponsors the KraneShares CSI China Five Year Plan ETF (NYSEArca: KFYP) and the KraneShares Bosera MSCI China ETF (NYSEArca: KBA).
KBA, which debuted in March, is the only China A-shares ETF to track an index issued by MSCI. KraneShares partnership with E Fund Management is the former’s second such arrangement with a Chinese asset manager.
The firm partners with Bosera Asset Management on KBA. Partnerships with local investment houses are necessary for foreign fund issuers to receive an investment quota from a Chinese regulatory agency for a Renminbi Qualified Foreign Institutional Investor (RQFII) status, which is required for issuing funds that deliver direct access to China’s A-shares markets.
ETF Trends editorial team contributed to this post.