Latest KraneShares ETF Employs Buyout Fund Strategy

BUYO has a net expense ratio of 0.89. The fund seeks to provide similar results to that of the Man Buyout Beta Index.

This index aims to provide similar risk exposures and performance to that of a private equity buyout fund. Private equity buyout funds are funds that seek to acquire or control companies to bolster their inherent value. 

As such, the index invests mostly in small- and midcap companies. These companies are selected from the Russell 2500 Index. 

Within the Russell index, stocks are chosen based on similar characteristics to that of a private equity buyout fund. A number of factors and characteristics are used to choose companies, such as fundamentals, industry classification, supply chains, and competitive environments. 

The Man Buyout Beta Index is market cap weighted, and companies within the index may not be more than 5% of the index’s overall weight. Per the fund prospectus, the underlying index included 260 securities, as of Sept. 30, 2024.

To better track the performance of the index, BUYO intends to use a replication strategy. However, the fund may instead opt for a representative sampling strategy instead. 

Up to 20% of the fund’s assets may be invested in instruments outside of the index. These investments get selected by the fund advisors based on how much they would help the fund track the underlying index. Eligible instruments include equity securities, derivatives, ETFs, and cash equivalents, among others. 

BUYO intends to possess similar industry concentrations to that of the underlying index. As of Sept. 30, 2024, the index held significant exposure to the industrials, information technology, healthcare, and consumer discretionary sectors. 

KraneShares currently has more than 25 ETFs listed in the United States. One of the largest KraneShares ETFs, the KraneShares CSI China Internet ETF (KWEB B), has over $8 billion in assets under management. 

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