<img height="1" width="1" style="display:none;" alt="" src="https://px.ads.linkedin.com/collect/?pid=4496002&amp;fmt=gif">

Kraneshares China Umbrella

Umbrella

KraneShares launches active ETF of ETFs

KraneShares, the New York China ETF specialist, is launching an actively managed umbrella fund that invests mostly in its own ETFs.

 

The KraneShares China Innovation ETF (KGRO) will invest 85% of its assets in KraneShares other China ETFs. The ETFs chosen will target China’s new economy, which refers to the higher growth areas like tech and healthcare that don’t have any state-owned enterprises. The specific ETFs and their projected allocations are below.

Kraneshares

 

The remaining 15% of KGRO’s assets will be invested in privately owned Chinese businesses that may have their IPOs soon. This is the first ETF to my knowledge that buys privately owned Chinese companies.

 

While the fund is actively managed, it is fully transparent.

 

KGRO charges 0.99%.

 

Analysis – interesting but expensive

There’s a lot to like here. For one, China is a great investment destination and the governments’ ongoing clampdown on tech companies has made the country’s stock market look decidedly cheap. For two, you get to partner with a Chinese state-owned bank (ICBC) and invest in privately owned companies.

 

If I had a question about this fund it is the fee. A full-blow 1% is high for an ETF. Potentially too high in my opinion considering this is an umbrella ETF. And in case anyone is wondering: the 1% includes the underlying ETF fees. There is no double dipping. 

 

There may be mitigating circumstances that help justify the fee. For one, China is more expensive. The trading infrastructure and licensing cost money to build out. And the supply chain costs like brokerage, custody and fund admin are higher in mainland China. However they’re not *that* much higher such to explain this fee. And certainly not that much higher for ICBC, the majority shareholder of KraneShares.

 

Another mitigating point may be the buying into private companies. This is more expensive and requires a lot more work (and another set of competencies) than simply trading public stocks.

 

I wonder what the market will think.

 

 

 

 

 

Subscribe to our Blog Notifications

• Contact us

Have questions about this?

Speak to one of our ETF data specialists about how this applies to your fund range.

Get in touch

Bernie Thurston

Bernie Thurston is the founder and CEO of Ultumus, a leading provider of ETF and index data, calculation, and workflow solutions. With over 20 years of experience in financial technology, Bernie has been at the forefront of index and ETF innovation since 2003.

His finance career began at Markit, where as Managing Director for Equities he designed and developed products for index and ETF composition and dividend forecasting from 2003 to 2011. He then founded and led DeltaOne Solutions as Managing Director, building it into a global provider of index and ETF trading data and technology services. The company managed over 100,000 multi-asset class products before being acquired by Markit in 2015.

Following the acquisition, while working for an ETF issuer, Bernie identified fundamental issues in how index and ETF data was represented across the industry. This led him to found Ultumus in 2016, building solutions for ETF primary market operations. Under his leadership, Ultumus has grown into a market leader serving major financial institutions globally, with its ETF Order Management System (OMS) supporting create and redeem workflows worldwide and its PCF platform calculating and distributing portfolio composition files for ETF issuers across every major market.

Bernie sold Ultumus to SIX Group in 2021, where it continues to expand across Europe, North America, and Asia-Pacific. Known for building lasting teams and leveraging cutting-edge technology, Bernie is focused on establishing Ultumus as the backbone of the global index and ETF industry through standardisation and automation.

Related posts

Search Fidelity Launches Thematic ETFs
AGG with higher yield Search