The KraneShares E Fund China Commercial Paper ETF (NYSEArca; KCNY), the newest member of the rapidly expanding lineup of exchange traded funds holding renminbi-issued Chinese bonds debuted Wednesday.
With an average maturity of just 128 days and a lineup comprised entirely of investment-grade holdings, KCNY can be used as an alternative to lower-yielding money market accounts and ETFs. KCNY tracks the CSI Diversified High Grade Commercial Paper Unhedged Index. Commercial paper held by the new ETF is investment-grade and “has a remaining term to final maturity of no more than one year and no less than one month,” according to KraneShares.
KCNY is the first commercial paper ETF to list in the U.S., said KraneShares in a statement.
“China money market funds deliver investment-grade credit quality, very short average maturity of 100 days and yields north of 4.50%5. Our goal is to deliver a similar product to U.S. investors in an ETF wrapper which provides intra-day liquidity and no minimums. We believe we’ve done that with KCNY,” said David Zhang, E Fund Management HK chief investment officer and co-portfolio manager of the fund, in the statement. “Chinese onshore commercial paper market has historically been very active and liquid, with more than $270 Billion USD outstanding and an average $3 Billion USD daily trading volume.”
E Fund Management, one of China’s premier asset managers, partners with KraneShares on the new ETF. The firm is China’s third-largest asset manager and has over $50 billion in assets under management.
As has been the case with China’s A-shares equity markets, the country’s enormous onshore bond market has been hard to access for most foreign investors. However, as is the case when it comes to A-shares equity ETFs, issuers are racing to launch Chinese onshore bond ETFs. [New China Bond ETF Comes to Town]
KCNY is the third China onshore bond ETF to debut in the U.S. in less than a month, following the Market Vectors ChinaAMC China Bond ETF (NYSEArca: CBON) and the Global X GF China Bond ETF (NYSEArca: CHNB).