KraneShares Debuts With China Five Year Plan ETF (KFYP)

by on July 23, 2013 | ETFs Mentioned:

The bulls are back from the weekend as upbeat earnings continue to steal the spotlight, despite potentially worrisome results from consumer staples’ bellwether McDonald’s, which fell short of analysts’ estimates. Newcomer KraneShares is making its first splash onto the ETF scene with the launch of the CSI China Five Year Plan ETF (KFYP). The new issuer is expected to focus exclusively on China-centric strategies and today’s launch is the very first of seven funds in total waiting in the development pipeline [Download 101 ETF Lessons Every Financial Advisor Should Learn]. 

The KraneShares launch comes at a time when most have been avoiding China exposure as a result of the sluggish growth overseas; as such, KFYP offers a very attractive opportunity for those eager to take advantage of the recent sell-off and favorably position themselves in anticipation of improving growth in China.

One Ticker, Five Year Plan

As the name suggests, the new KraneShares ETF is based around China’s five-year plan, which is a series of development initiatives that have been released by the government every five years since 1953. The five-year plan is very straightforward in that it outlines key goals for social and economic growth as well as industrial planning and general urban development. More specifically, China’s last five-year plan, released in 2011 and spanning through 2015, focuses on: increasing domestic consumption, modernizing the agriculture industry, promoting environmental protection and encouraging domestic tech innovation, among other things [see ETFs For China's Investment Sweethearts].

Unlike other China ETFs on the market, KFYP does not follow an index linked to some segment of the country’s equity market; instead, this unique ETF cherry-picks companies that the portfolio management team deems are best positioned to benefit from the nation’s five-year economic development plan. From a portfolio composition perspective, underlying index components include securities of companies in various sectors. including but not limited to healthcare, Internet, autos, machinery, materials, transportation, technology, and media [see also Asia-Centric ETFdb Portfolio].

Meet the Competition

KFYP will be the newest addition to the growing China Equities ETFdb Category, which stands at over one dozen offerings; the new ETF falls right in the middle of the cost spectrum here, charging 0.68% in annual fees with the category range spanning from 0.52% all the way to 1.1%. KraneShares’s first ETF will face some stiff competition from established players, including the top three competitors by total assets under management:

  • iShares FTSE China 25 Index Fund (FXI, Awith $5 billion in AUM
  • iShares MSCI Hong Kong Index Fund (EWH, B+) with over $2 billion in AUM
  • iShares MSCI China Index Fund (MCHI, Awith ober $850 million in AUM

Follow me on Twitter @SBojinov

[For more ETF analysis, make sure to sign up for our free ETF newsletter]

Disclosure: No positions at time of writing.