KraneShares Partners with Nikko to Launch Active Asia Pacific High Yield Bond ETF (Ticker: KHYB)

Rhea-AI Summary

Krane Funds Advisors has launched the KraneShares Asia Pacific High Yield Bond ETF (Ticker: KHYB), managed by Nikko Asset Management, which oversees over $282 billion in assets. The ETF targets USD-denominated high yield bonds from Asia, excluding Japan, and benchmarks against the J.P. Morgan Asia Credit Index (JACI). With an average yield of 7.9% as of June 2021, compared to 4.6% for US bonds, the fund aims to capitalize on the growing Asia bond market, which has increased from $250 billion in 2010 to over $1.2 trillion in 2020.

Positive

• Launch of the KraneShares Asia Pacific High Yield Bond ETF (Ticker: KHYB) enhances investment options for high yield bonds in Asia.
• Managed by Nikko Asset Management, known for its expertise in Asia's fixed income market.
• The Asia high yield bond market has shown significant growth, increasing 368% from $250 billion to over $1.2 trillion from 2010 to 2020.
• As of June 2021, Asia high yield corporate bonds offered a yield of 7.9%, outperforming US counterparts at 4.6%.

Negative

• The ETF is subject to interest rate risk, which may lead to declines in bond value as rates rise.
• Investments in high yield and unrated securities can be more volatile and sensitive to adverse economic changes.

NEW YORK, Aug. 2, 2021 /PRNewswire/ -- Krane Funds Advisors, LLC, ("KraneShares"), a global asset management firm known for its China-focused exchange-traded funds (ETFs) and innovative China investment strategies, today announced the launch of the KraneShares Asia Pacific High Yield Bond ETF (Ticker: KHYB).

KHYB is an active ETF managed by sub-advisor Nikko Asset Management Americas, Inc. ("Nikko"). Nikko was established in 1959 and is one of Asia's largest asset managers with over $282 billion in assets under management. Nikko is a leader in Asia fixed income with 30+ years of experience in the market.¹

KHYB is benchmarked to the JP Morgan Asia Credit Index (JACI) Non-Investment Grade Corporate Index. The fund provides exposure to USD-denominated high yield debt securities issued by companies in Asia, excluding Japan.

"We believe the Asia ex-Japan High Yield bond market's comparatively high yields, low representation in global bond indexes, and historically low default rates make it a compelling opportunity for investors," said Jonathan Krane, Chief Executive Officer of KraneShares. "KraneShares is proud to partner with Nikko and leverage their fixed income expertise to bring the Asia high yield bond market to investors through our NYSE-listed KraneShares Asia Pacific High Yield Bond ETF (Ticker: KHYB) ETF."

Wai Hoong Leong from Nikko is the portfolio manager for KHYB. He is supported by Nikko's Asia fixed income team, which is one of the largest in the region.¹ Using a proprietary process that involves both quantitative and qualitative factors, the team assess an issuer's credit profile, security value, and relative value compared to other similar securities.

The Asia Bond Market has witnessed steady growth over the last decade, which reflects the region's rising economic significance. The J.P. Morgan Asia Credit Index grew from a market capitalization of $250 billion in 2010 to over $1.2 trillion in 2020, an increase of 368%². Asia high yield bonds offer relatively high yield compared to global markets. As of June 2021, Asia high yield corporate bonds had an average yield of 7.9% compared to 4.6% for US high yield bonds.³ The default rate of Asia high-yield corporate bonds has been lower than that of high yield bonds in other EM regions in six of the past nine years, and was lower than the US high yield default rate in both 2019 and 2020.⁴

"We have seen considerable demand for US dollar denominated high yield Asia bond products globally from investors drawn by the stable underlying macro trends, healthy credit fundamentals, attractive returns and valuations," said Liang Choon Koh, Head of Asia Fixed Income at Nikko AM Asia. "We are excited to work with KraneShares to bring this strategy to a U.S. and international audience."

The launch was achieved through converting and renaming the existing KraneShares CCBS China Corporate High Yield Bond USD Index ETF (Ticker: KCCB). Effective August 2, 2021, the Fund will be the actively managed KraneShares Asia Pacific high Yield Bond ETF.

For more information about KHYB, visit kraneshares.com/khyb or email info@kraneshares.com.

About KraneShares

Krane Funds Advisors, LLC is the investment manager for KraneShares ETFs. Our suite of China-focused ETFs provides investors with solutions to capture China's importance as an essential element of a well-designed investment portfolio. We strive to deliver innovative, first-to-market strategies developed based on our strong partnerships and deep knowledge of investing. We help investors stay up to date on global market trends and aim to provide meaningful diversification. Krane Funds Advisors, LLC, is a signatory of the United Nations-supported Principles for Responsible Investing (UN PRI). The firm is majority owned by China International Capital Corporation (CICC).

Citations

1.  Data from Nikko Asset Management as of 3/31/2021.

2.  Data from JP Morgan as of 3/31/2021.

3.  Data from Bloomberg as of 3/31/2021. Asia high yield bond market represented by the Bloomberg Barclays Asia USD High Yield Diversified Credit Index. US high yield bond market represented by the Bloomberg Barclays US Corporate High Yield Index.

4.  Data from JP Morgan Asia Credit Outlook & Strategy, April 2021.

Index Definitions

The J.P. Morgan Asia Credit Index (JACI) is J.P. Morgan's broadest, liquid US-dollar denominated Asia debt benchmark, and it tracks total returns for actively traded US-dollar denominated debt instruments in the Asia ex-Japan region.

Important Notes

Carefully consider the Funds' investment objectives, risk factors, charges and expenses before investing. This and additional information can be found in the Funds' full and summary prospectus, which may be obtained by visiting www.kraneshares.com. Read the prospectus carefully before investing.

Risk Disclosures

Investing involves risk, including possible loss of principal. There can be no assurance that a Fund will achieve its stated objectives. The Funds are subject to political, social or economic instability within China which may cause a decline in value. Fluctuations in currency of foreign countries may have an adverse effect on domestic currency values. Emerging markets involve heightened risk related to the same factors as well as increased volatility and lower trading volume.

The KraneShares Asia Pacific High Yield Bond ETF is subject to interest rate risk, which is the chance that bonds will decline in value as interest rates rise. The Fund is subject to sovereign and quasi-sovereign debt risk. The governmental authority that controls the repayment of sovereign and quasi-sovereign debt may be unwilling or unable to repay the principal and/or interest when due. The Fund may invest in high yield and unrated securities, whose prices are generally more sensitive to adverse economic changes and consequently more volatile. The Fund is subject to industry concentration risk and is non-diversified. Narrowly focused investments typically exhibit higher volatility.

The KraneShares ETFs are distributed by SEI Investments Distribution Company (SIDCO), which is not affiliated with Krane Funds Advisors, LLC, the Investment Adviser for the Fund, any sub-advisers for the Funds.

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SOURCE Krane Funds Advisors, LLC

FAQ

What is the KraneShares Asia Pacific High Yield Bond ETF (Ticker: KHYB)?

The KraneShares Asia Pacific High Yield Bond ETF (Ticker: KHYB) is an active ETF that invests in USD-denominated high yield bonds from Asia, excluding Japan.

Who manages the KraneShares Asia Pacific High Yield Bond ETF (KHYB)?

The ETF is managed by Nikko Asset Management, a prominent asset manager in Asia.

What is the yield of KHYB compared to US high yield bonds?

As of June 2021, KHYB had an average yield of 7.9%, compared to 4.6% for US high yield bonds.

When was the KraneShares Asia Pacific High Yield Bond ETF (KCCB) launched?

The KraneShares Asia Pacific High Yield Bond ETF was launched on August 2, 2021, converting from the previous KCCB ETF.

What benchmark does the KHYB ETF use?

The KHYB ETF is benchmarked to the J.P. Morgan Asia Credit Index (JACI) Non-Investment Grade Corporate Index.