Concerns of tariff and trade wars with China may leave investors sitting on the sideline when it comes to China and EM exposures. The KraneShares Dynamic Emerging Markets Strategy ETF (KEM ) actively manages its China exposures while investing in EM countries. It’s a fund worth consideration in uncertain times.
Despite recent U.S. equity dominance, emerging markets continue to make up the majority of GDP growth globally over the last decade. In 2023, EM countries contributed to more than half of GDP growth worldwide, according to data collated by KraneShares. While the outlook for EM economies carries its share of challenges and complexities this year, an active approach may capture potential EM opportunities.
Invest in EM While Actively Managing China Exposure
KEM captures the emerging market equity opportunity set. It seeks to outperform the MSCI Emerging Markets Index and actively manages its China exposures based on technical signals, fundamentals, and valuations. KEM ended last year up 12.80% on a total return basis.
The strategy takes a dynamic approach to EM investing. KEM invests in two main ETFs, the KraneShares MSCI All China Index ETF (KALL ) and the KraneShares MSCI Emerging Markets ex China Index ETF (KEMX ). The strategy actively manages the weighting of these two exposures with adjustments made on a quarterly-basis at a minimum, or more frequently, depending upon the market environment. It may also invest up to 10% of its portfolio in cash and cash equivalents in certain market conditions.
KALL invests in China companies listed in Mainland China, Hong Kong, and U.S. exchanges. It provides broad exposure to the China economy. Meanwhile KEMX invests in large- and midcap companies within EM countries while excluding China.
Through its exposures, KEM’s strategy approaches EM ex-China and China as two distinctly separate asset classes. Each exposure is measured for underlying fundamentals such as valuations, moving averages, and more. This systemic approach provides EM exposure while remaining responsive to overall market conditions.
KEM carries an expense ratio of 0.47%.
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