It may only be March, but global summer travel is just around the corner. While the lockdown era of the pandemic seems to now be well in the rearview mirror, tourism is still returning to its prior place of privilege. As global travel rises again, it is also increasingly diversifying across markets. The right travel ETF can provide a broad view to a global travel resurgence, offering portfolio diversification and potential for returns.
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For example, consider travel ETF KLXY. The KraneShares Global Luxury Index ETF (KLXY) tracks the Solactive Global Luxury Index. The strategy charges 69 basis points (bps) for its approach.
It offers diversification by investing in firms that, while not based in China, can benefit from increased travel by Chinese and other tourists from around the world. That has helped the strategy to outperform both its ETF Database Category and Factset Segment averages. It has returned 6% over one year compared to 5% and 4.5% respectively over three months.
The travel ETF looks for firms in the luxury sector, writ large, engaged in travel & leisure, apparel, and other goods. The strategy’s index includes firms screen for size, trading volume, and country. The index then ranks by market cap and assigns the highest weights to the top five securities. Further, it caps U.S. firm investments to 60% so as to maintain a global allocation.
With global travel to surpass pre-pandemic levels in 2024, investors may want to consider investing in that trend. By inherently diversifying across economies via global tourism, the strategy could boost a U.S.-heavy portfolio if rate cuts don’t arrive, for example. KLXY’s price sits above its 50-day Simple Moving Average (SMA) per YCharts, and may be worth watching for curious investors.
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