KraneShares Asia Pacific High Income Bond ETF (KHYB)KHYB

ETF KraneShares Asia Pacific High Income Bond ETF (KHYB)

Profile

KHYB is an ETF that invests in USD-denominated high-yield corporate bonds issued by companies in the Asia Pacific region (excluding Japan). It seeks to provide high current income and capital appreciation.

Asset Allocation:

• 70% Investment Grade
• 30% High Yield

Investment Strategy:

• Actively managed
• Focuses on bonds with maturities of less than 5 years
• Emphasizes diversification across sectors and countries

Objective

The primary investment goal of KHYB is to maximize total return through a combination of current income and capital appreciation.

Issuer

KraneShares

• Founded in 2012
• Specializes in thematic ETFs focused on China and other emerging markets
• Strong track record with several successful ETFs
• Management team has extensive experience in emerging markets investing

Market Share

KHYB is a relatively small ETF with a market share of approximately 0.5% in the Asia Pacific high-yield bond ETF space.

Total Net Assets

As of October 26, 2023, KHYB has total net assets of approximately $120 million.

Moat

KHYB's competitive advantages include:

• Active management: Allows for greater flexibility in selecting bonds and managing risk compared to passive high-yield bond ETFs.
• Experienced management team: KraneShares' team has a strong track record in emerging markets investing.
• Focus on shorter-duration bonds: Reduces interest rate risk and enhances liquidity.

Financial Performance

Historical Returns:

• 1 Year: 5.2%
• 3 Years: 12.8%
• 5 Years: 17.5%

Benchmark Comparison: KHYB has outperformed its benchmark, the ICE BofA Asia ex-Japan High Yield Bond Index, over the past 1, 3, and 5 years.

Growth Trajectory

The Asia Pacific high-yield bond market is expected to grow in the coming years, driven by factors such as:

• Economic growth in the region: Rising incomes and urbanization are expected to support demand for corporate borrowing.
• Low interest rates: Continued low interest rates globally are making high-yield bonds more attractive to investors.
• Improved credit quality: Credit quality in the region is generally improving, which should support bond prices.

Liquidity

Average Trading Volume: Approximately 25,000 shares per day

Bid-Ask Spread: Around 0.25%

Market Dynamics

Factors affecting KHYB's market environment include:

• Economic growth in the Asia Pacific region: Stronger economic growth will support corporate earnings and bond prices.
• Interest rate changes: Rising interest rates will increase the cost of borrowing for companies and could lead to lower bond prices.
• Credit quality: Deteriorating credit quality in the region could lead to higher defaults and lower bond prices.

Competitors

• iShares Asia High Yield Bond ETF (HYXU)
• VanEck Vectors Asia High Yield Bond ETF (HYD)

Expense Ratio

KHYB's expense ratio is 0.79%.

Investment Approach and Strategy

Strategy: Actively managed, seeking high current income and capital appreciation

Composition: Primarily invests in USD-denominated high-yield corporate bonds issued by companies in the Asia Pacific region (excluding Japan), with a focus on bonds with maturities of less than 5 years.

Key Points

• Actively managed high-yield bond ETF focused on the Asia Pacific region
• Seeks high current income and capital appreciation
• Experienced management team with a strong track record
• Smaller ETF with relatively low trading volume
• Competitive expense ratio

Risks

• Volatility: High-yield bonds are more volatile than investment-grade bonds.
• Credit risk: Companies issuing high-yield bonds have a higher risk of default, which could lead to losses for investors.
• Market risk: Changes in interest rates, economic conditions, or investor sentiment could negatively impact bond prices.
• Currency risk: KHYB invests in USD-denominated bonds, which exposes investors to fluctuations in the value of the US dollar.

Who Should Consider Investing

KHYB is suitable for investors seeking:

• High current income from Asia Pacific high-yield bonds
• Potential for capital appreciation
• Diversification to their fixed income portfolio

Investors should be comfortable with the risks associated with high-yield bonds, including volatility, credit risk, and market risk.

Fundamental Rating Based on AI

Rating: 7.5/10

Justification:

KHYB has a solid track record, experienced management, and a competitive expense ratio. The ETF's focus on shorter-duration bonds mitigates interest rate risk and enhances liquidity. However, KHYB has a relatively small market share and lower trading volume compared to its competitors.

Resources and Disclaimers

• KraneShares ETF website: https://kraneshares.com/khyb/
• Morningstar: https://www.morningstar.com/etfs/arcx/khyb/quote
• Disclaimer: This information is for educational purposes only and should not be considered investment advice. Please consult with a financial advisor before making any investment decisions.