On Tuesday, KraneShares revealed the latest addition to its ETF lineup, the KraneShares Hedgeye Hedged Equity Index ETF (KSPY).
KSPY aims to provide investors with S&P 500 exposure while mitigating volatility and downside risk. The fund has a net expense ratio of 0.69%.
“With equities reaching record valuations, volatility is becoming a significant concern for investors,” said Brendan Ahern, CIO of KraneShares. “The top 10 stocks in the S&P 500 currently account for over 35% of the index’s market value, which is higher than the 27% share they had during the tech bubble in 2000. This concentration could potentially increase risk by skewing performance toward certain sectors or companies. We believe now may be an opportune time for investors to consider a strategy that aims to reduce volatility and provide a downside hedge like KSPY.”
Studying Option Signals
To achieve the fund’s investment objective, KSPY tracks the Hedgeye Hedged Equity Index. This index, managed by Hedgeye Asset Management, scrutinizes the S&P 500’s daily trading signals. The index then uses options trading to gain access to securities within the S&P 500. Eligible options for trading on the fund include both European-style exchange traded and FLEX options.
Hedgeye’s model uses proprietary signals that help to determine when to buy or sell put or call options. By rotating through different options strategies, the Hedgeye model seeks to provide option income while managing downside risk.
“We are thrilled to partner with Hedgeye, an innovative research firm, to deliver a differentiated solution for investors seeking equity exposure with enhanced risk management,” noted KraneShares CEO Jonathan Krane. “Combining KraneShares’ ETF expertise with select partners like Hedgeye underscores our commitment to bringing sophisticated options-based strategies to our investors.”
Even though KSPY reserves the right to use a replication strategy, the fund generally expects to apply a representative sampling strategy to track the index. KSPY may also invest a smaller portion of assets toward securities not present in the Hedgeye index that fund managers believe will help the fund better track the index.
KraneShares currently has over 25 ETFs listed in the United States. As a whole, these funds account for over $7.2 billion in assets under management.
For more information, please visit VettaFi.com | ETF Trends.
