A carbon offset ETF is handily outpacing its commodity ETF peers year to date through January 30.
The KraneShares Global Carbon Offset Strategy ETF (KSET) impressively rallied 26.6% in the period between January 1 and January 30, 2024. The fund beat the next-best-performing commodity ETF by near 1,500 basis points year to date.
KSET tracks the S&P GSCI Global Voluntary Carbon Liquidity Weighted Index. The carbon offset ETF’s underlying index provides broad coverage of the voluntary carbon market by tracking carbon offset futures contracts.
Through January 30, the commodity ETF leaderboard included a variety of funds. The global carbon offset ETF is leading by a wide margin, with the other best performers providing exposure to different segments within traditional fossil fuels and agriculture.
“While a handful of stocks have led the stock market in early 2024, there are other strong performers outside of equities,” said Todd Rosenbluth, head of research at VettaFi. “Advisors might want to consider alternatives like accessing carbon offsets.”
Under the Hood of the KraneShares Carbon Offset ETF
The fund aims to provide global coverage of voluntary carbon markets by tracking carbon offset futures contracts comprising nature-based global emission offsets (N-GEOs) and global emission offsets (GEOs), which trade through the CME Group. KSET will dynamically add additional offset markets as they reach scale, according to KraneShares.
KSET’s underlying index is structured in a way that will allow flexibility in reweighting the securities it tracks. The fund’s underlying index can also move securities in and out of the index regularly. The index only tracks carbon offset credit futures that have a maturity within the next two years. It also weights the offset futures by the total value of their traded volume over the last six months.
KSET is down since its inception in April 2022. This makes now a potentially ideal time for investors to buy in at discount and participate in the carbon offset ETF’s rebound.
The fund carries an expense ratio of 0.79%.
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