The month of February saw continued market volatility as investor sentiment and uncertainty continued to drive investments. Advisors and investors continued to pivot their investment strategy in anticipation of the Fed raising interest rates in March, and CPI and other inflation-measuring data continued to come back high, showing no reprieve from the pressures for now. The following were the top three funds for KraneShares, an investment firm with an array of funds and investment strategies focused within the U.S., China, carbon markets, and more.
Investment Into China’s Internet Sector, and China’s Growth by Proxy
The KraneShares CSI China Internet ETF (KWEB) continues to perform strongly after a meteoric last year, bringing in $257.46 million in flows in the month of February. Many advisors and investors have come to associate the fund with China’s growth, as its internet sector and tech giants exemplify some of the best examples of the potentials within the space.
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. KWEB provides exposure to the Chinese internet equivalents of Google, Facebook, Amazon, eBay, and the like, all companies that benefit from a growing user base within China, as well as a growing middle class.
KWEB carries an expense ratio of 0.70%.
Positioning for Slowed Economic Growth Within the U.S.
The Quadratic Deflation ETF (BNDD) has experienced a lot of interest by advisors as a way to hedge against deflation risk when the U.S. interest rate flattens or inverts. In the month of February, BNDD brought in $50.79 million in flows as advisors and investors repositioned their portfolios around a different market and economic outlook.
BNDD is offered by KFA Funds, a KraneShares company, and is a fixed income, ESG-focused, actively managed ETF that seeks to benefit from lower growth, a reduction in the spread between short- and long-term interest rates, deflation, and lower or negative long-term interest rates.
BNDD carries an expense ratio of 0.99%.
Investing in Carbon Credits in North America
The KraneShares California Carbon Allowance ETF (KCCA) offers investors targeted exposure to the California and Quebec carbon allowances markets. The fund brought in $12.61 million in the month of February as investors sought exposure to one of the fastest growing carbon markets worldwide.
KCCA is a fund that offers exposure to the California cap-and-trade carbon allowance program and is benchmarked to the IHS Markit Carbon CCA Index. The CCA includes up to 15% of the cap-and-trade credits from Quebec’s market. The index measures a portfolio of futures contracts on carbon credits issued by the CCA and only includes futures with a maturity in December in the next year or two, while using a wholly owned subsidiary in the Cayman Islands to prevent investors from needing a K-1 for tax purposes.
KCCA carries an expense ratio of 0.79%.
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