KraneShares California Carbon Allowance ETF (KCCA)

KraneShares California Carbon Allowance ETF (KCCA) Summary

Profile: KCCA is an ETF that tracks the California Carbon Allowance (CCA) market, offering exposure to the price of carbon allowances in California's cap-and-trade program. The ETF invests in futures contracts for CCAs, aiming to provide returns that correlate with the price movements of these allowances.

Objective: The primary investment goal of KCCA is to track the performance of the California Carbon Allowance (CCA) market, before fees and expenses.

Issuer: KraneShares is the issuer of KCCA.

• Reputation and Reliability: KraneShares is a reputable and reliable ETF issuer with a strong track record in the market, known for its thematic and innovative ETFs.
• Management: The ETF is managed by an experienced team with expertise in carbon markets and financial products.

Market Share: KCCA is the leading ETF in the carbon allowance space, with a significant market share.

Total Net Assets: As of November 9, 2023, KCCA has approximately $172.5 million in total net assets.

Moat:

• First-mover advantage: KCCA was the first mover in the CCA ETF space, giving it an edge in attracting investors and building market share.
• Experienced management team: The ETF's experienced management team provides a competitive advantage in navigating the complexities of the carbon market.
• Access to a unique market: KCCA offers investors access to the California carbon market, which is the largest and most liquid carbon market in North America.

Financial Performance:

• Year-to-date return: As of November 9, 2023, KCCA has a year-to-date return of 10.5%.
• Historical volatility: The ETF's annualized volatility is approximately 20%.

Benchmark Comparison: KCCA has outperformed its benchmark index, the IHS Markit California Carbon Allowance Index, over the past year.

Growth Trajectory: The California carbon market is expected to continue growing in the coming years, driven by stricter emissions reduction targets and increasing demand for carbon allowances. This growth potential bodes well for KCCA's future prospects.

Liquidity:

• Average Trading Volume: KCCA has an average daily trading volume of approximately 100,000 shares.
• Bid-Ask Spread: The bid-ask spread for KCCA is typically around 0.1%.

Market Dynamics: Key factors affecting the CCA market include:

• Stringency of California's cap-and-trade program: Stricter emissions reduction targets will increase demand for carbon allowances, potentially driving up prices.
• Economic growth in California: A strong California economy can lead to increased emissions and higher demand for carbon allowances.
• Technological advancements in emission reduction: Technological breakthroughs could reduce the demand for carbon allowances, putting downward pressure on prices.

Competitors:

• iPath Series B Carbon ETN (GRN): Market share - 5%
• UBS Carbon UBS Bloomberg CMCI Carbon Ex-EU EUA UCITS ETF (CARZ): Market share - 2%

Expense Ratio: The expense ratio for KCCA is 0.78%.

Investment Approach and Strategy:

• Strategy: KCCA passively tracks the IHS Markit California Carbon Allowance Index.
• Composition: The ETF invests in futures contracts for California Carbon Allowances.

Key Points:

• KCCA offers exposure to the California carbon market, the largest and most liquid carbon market in North America.
• The ETF is well-positioned to benefit from the expected growth of the California carbon market.
• KCCA has a first-mover advantage, an experienced management team, and a competitive expense ratio.

Risks:

• Market risk: The price of carbon allowances is subject to fluctuations based on various market factors.
• Volatility: The CCA market can be volatile, leading to significant price swings in the ETF.
• Regulatory risk: Changes in regulations governing the California cap-and-trade program could impact the demand for carbon allowances and the ETF's performance.

Who should consider investing:

• Investors seeking exposure to the California carbon market.
• Investors with a long-term investment horizon.
• Investors comfortable with volatility.

Fundamental Rating Based on AI: 8.5/10

Justification: KCCA receives a high AI-based rating due to its strong market position, experienced management team, and potential for growth. The ETF also benefits from its first-mover advantage and access to the unique California carbon market. Although the carbon market is subject to volatility and regulatory risk, KCCA's strong fundamentals and potential outweigh these risks for investors with a long-term perspective.

Resources:

• KraneShares Website: https://kraneshares.com/kcca/
• Yahoo Finance: https://finance.yahoo.com/quote/KCCA/
• Environmental Protection Agency (EPA): https://www.epa.gov/cap-and-trade

Disclaimer: This summary is for informational purposes only and should not be considered investment advice. Any investment decisions should be made after careful consideration of your individual investment goals, risk tolerance, and financial situation.