It’s clear that China investing presents a complicated set of questions right now. The country’s economy remains so large as to require many investors to take a stance. That said, several challenges have clouded the country’s near-term investing landscape. Such a set of circumstances may call for a more durable strategy, like a long-term China ETF such as KBA.
See more: This China Equities ETF Is Defying the Odds
(KBA ), the KraneShares Bosera MSCI China A 50 Connect Index ETF, has performed well over the long term. The long-term China ETF has returned 41.3% since its launch more than ten years ago, per YCharts. According to VettaFi data, it has returned 5.1% over the last five years, outperforming both its ETF Database Category and Factset Segment averages.
The strategy owes that performance to its approach, tracking the MSCI China A Index. KBA tracks a market cap-weighted index of large and mid-cap Chinese equities. In doing so, it looks for the two largest stocks from each GICS sector, selecting the others by market cap until the securities count hits 50.
The balancing sectors approach presents an appealing long-term option. By limiting exposure to any one sector, the long-term China ETF can benefit from exposure to underrated areas while avoiding problems from tough sectors that disappoint. With China’s real estate landscape bringing down its overall economy, limiting exposure to those firms could appeal.
KBA hit its tenth anniversary earlier this month. Should the Chinese government manage to right the ship of the broader economy, it may be a strong option. While most investors likely wouldn’t hold it for another decade, the long-term China ETF could appeal nonetheless. For just a 55 basis point (bps) fee, it makes an intriguing option to diversify away from U.S. equities.
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