Krane Funds Advisors, LLC,, a global asset management firm known for its China-focused exchange-traded funds (ETFs) and innovative China investment strategies, announced the launch of the KraneShares Asia Pacific High Yield Bond ETF.
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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.
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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 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.
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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. Effective August 2, 2021, the Fund will be the actively managed KraneShares Asia Pacific high Yield Bond ETF.
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