Advisors and investors are showing renewed interest in China once more as the regulatory cycle appears to be drawing to a close while the central bank engages in a loosening fiscal policy that is seeing stimulus being added to the economy for businesses and consumers. News of less stringent COVID-19 lockdown requirements saw an influx of investors into China once more, while stateside investors pivoted to hedging their portfolios for a stagflation environment while seeking income opportunities within managed futures.
- The KraneShares CSI China Internet ETF (KWEB) tracks the CSI Overseas China Internet Index and measures the performance of publicly traded companies outside of mainland China that operate within China’s internet and internet-related sectors. This includes companies that develop and market internet software and services, provide retail or commercial services via the internet, develop and market mobile software, and manufacture entertainment and educational software for home use. A previously volatile segment within China that is currently priced at multiples significantly less than U.S. counterparts, KWEB has seen an influx of investment in June, bringing in net inflows of $1.124 billion, and has an expense ratio of 0.70%.
- The Quadratic Interest Rate Volatility and Inflation Hedge ETF (IVOL) from KFAFunds, a KraneShares company, is actively managed and designed to have a twofold hedge against an increase in fixed income volatility and/or an increase in inflation. IVOL brought in $74 million in June and saw a huge influx in the dates surrounding the Fed meeting as investors increasingly positioned for stagflation (an environment of simultaneous economic slowdown and high inflation). The fund also seeks to maximize yield curve increases, either brought about by long-term interest rates increasing or short-term interest rates falling; both are tied to big equity market declines. IVOL has an expense ratio of 1.05%.
- The KFA Mount Lucas Index Strategy ETF (KMLM) from KFAFunds, a KraneShares company, invests in futures contracts in commodities, currencies, and global bond markets, and in June brought in $70.31 million in inflows as advisors and investors took note of the performance of managed futures in the challenged U.S. environment. KMLM measures a portfolio containing currency, commodity, and global fixed income futures and offers possible hedges for equity, bond, and commodity risk, having demonstrated a negative correlation to both equities and bonds in bull and bear markets. Investing in managed futures offers diversification for portfolios, and carrying them within a portfolio can potentially help mitigate losses during market volatility and sinking prices. KMLM rebalances monthly and has an expense ratio of 0.90%.
- The KraneShares Bosera MSCI China A Share ETF (KBA) invests in Chinese A-shares — specifically those from the MSCI China A 50 Connect Index — and experienced inflows of $65.09 million in June as investors moved back into investment opportunities in China. This fund seeks to capture 50 large-cap companies that have the most liquidity and are listed on the Stock Connect while also offering risk management through the futures contracts for eligible A-shares listed on the Stock Connect. The index utilizes a balanced sector weight methodology to give exposure to the breadth of the Chinese economy and has an expense ratio of 0.56% with current fee waivers that expire August 1, 2022.
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