Krane Funds Advisors, LLC, begun trading a ‘One Belt One Road’ ETF, the KraneShares MSCI One Belt One Road ETF (NyseArca: OBOR), on Friday, September 08, 2017. Here is a synopsis of the new ETF:
|Exchange: NYSE ARCA
|Name: KraneShares MSCI One Belt One Road ETF
|Net Expense Ratio: 0.79%
The KraneShares MSCI One Belt One Road ETF seeks to provide investment results that, before fees and expenses, track the price and yield performance of the MSCI Global China Infrastructure Exposure Index.
The MSCI Global China Infrastructure Exposure Index is designed to track the equity market performance of companies that are more likely to be potential beneficiaries of China’s ‘‘One Belt,One Road’’ (OBOR) initiative, which is a strategy and framework adopted by the Chinese government that will emphasize interconnectedness and cooperation between China and other Eurasian countries.
The OBOR initiative is a primary focus of Chinese President Xi Jinping. This extensive infrastructure initiative is a long-term modernization of the original Silk Road trading routes. The OBOR initiative connects China by land through Central Asia, West Asia, the Middle East, and Europe (“One Belt”), and by sea to the western coast of Africa, the Red Sea, and the Mediterranean (“One Road”). All together the OBOR initiative will connect 69 countries (including China), representing an aggregate population of 4.5 billion and a nominal GDP of $23 trillion USD. These figures represent 62% of the world’s population and 30% of global GDP.
The Underlying Index includes issuers whose revenues are more likely to benefit from China’s infrastructure development initiatives within the relevant industries, as determined by the provider of the Underlying Index, MSCI Inc. (Index Provider). The Underlying Index is modified so that 45% of the weight of the Underlying Index is allocated to Chinese issuers and 55% to issuers of other countries as of each Underlying Index rebalance. Within these allocations,the issuers are weighted based on their free-float market capitalization, except that no country’s issuers (except for China) will represent more than 10% of the Underlying Index as of each Underlying Index rebalance. Although the Underlying Index may include the securities of small-cap, mid-cap and large-cap issuers,each issuer must meet a minimum market capitalization requirement to be included in the Underlying Index.The Underlying Index excludes issuers of certain countries based, in part, on their expected ability to benefit from China’s infrastructure development initiatives.
The following China-related securities may be included in the Underlying Index and/or represent investments of the Fund:
• China A-Shares of companies incorporated in mainland China and traded on Chinese exchanges. China-A Shares are primarily purchased and sold in the domestic Chinese market. To the extent the Fund invests in China A-Shares, it would expect to do so through the Shanghai-Hong Kong Stock Connect Program or Shenzhen-Hong Kong Stock Connect Program. A RQFII or QFII license may also be acquired to invest directly in ChinaA-Shares.
• China B-Shares of companies listed on the Shanghai or Shenzhen Stock Exchange but quoted and traded in foreign currencies (such as Hong Kong Dollars or U.S. Dollars), which were primarily created for trading by foreign investors.
• China H-Shares of companies incorporated in mainland China and listed on the Hong Kong Stock Exchange, where they are traded in Hong Kong dollars and may be traded by foreign investors.
• China N-Shares of companies with business operations in mainland China and listed on an American stock exchange,such as NYSE or NASDAQ.
• P-Chips of private sector companies with a majority of their business operations in mainland China and controlling private Chinese shareholders, which are incorporated outside of mainland China and traded on the Hong Kong Stock Exchange in Hong Kong dollars.
• Red Chips, which are shares of companies with a majority of their business operations in mainland China and controlled by the central, provincial or municipal governments of the PRC, whose shares are traded on the Hong Kong Stock Exchange in Hong Kong dollars.
As of June 30, 2017, the Underlying Index included 92 securities of companies with a total market capitalization of $949 billion,a capitalization range of $919 million to $57.9 billion and an average market capitalization of $10.3 billion. The Underlying Index is rebalanced semi-annually. The Underlying Index is provided by the Index Provider. The Index Provider is independent of the Fund and Krane.
The Fund is non-diversified. To the extent the Underlying Index is concentrated in a particular industry,the Fund is expected to be concentrated in that industry. As of June 30,2017,issuers in the industrials sector (41.0%), utilities sector (18.0%) and materials sector (12%) represented significant portions of the Underlying Index.
OBOR Home Page
Here is a comment from Jonathan Krane, Chief Executive Officer at KraneShares:
“We believe the OBOR initiative is creating a new paradigm in global investing. The OBOR initiative will receive trillions of dollars [Could Total Up To $6 trillion US dollars”, People’s Daily Online, 6/20/2015)] of investment over the next decade and should increase the economies and trade of both China and the participating nations.”
About Krane Funds Advisors, LLC
Krane Funds Advisors, LLC is the investment manager for KraneShares ETFs. Our suite of China focused ETFs provides investors with solutions to capture China’s importance as an essential element of a well-designed investment portfolio. We strive to provide innovative, first to market strategies that have been developed based on our strong partnerships and our deep knowledge of investing. We help investors stay up to date on global market trends and aim to provide meaningful diversification. Krane Funds Advisors, LLC is majority owned by China International Capital Corporation (CICC).