KraneShares MSCI All China ETF earns a Morningstar Medalist Rating of Neutral with strength in areas such as Process offset by weaker spots such as People. The portfolio maintains a sizable cost advantage over competitors, priced within the lowest fee quintile among peers.  

 The team managing the passive strategy earns a Low People Pillar. The strategy's sensible investment philosophy earns an Above Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an overweight liquidity exposure and has a substantial underweight in quality exposure compared with category peers. High liquidity exposure is attributed to stocks with a high trading volume, lending managers more flexibility. And a low quality exposure is rooted in stocks with higher financial leverage and lower profitability. Even though the strategy's parent organization has some investor-friendly attributes like substantial personal investments from managers, a cohort of unseasoned portfolio managers holds it back. As a result, the firm obtains a Low Parent Pillar.

Analyst Rating

Yum China Hlds

Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category index on a risk-adjusted basis over the long term. KraneShares MSCI All China ETF earns an Above Average Process Pillar rating. The predominant contributor to the rating is that this fund tracks an index. Historical data, like Morningstar's Active/Passive Barometer, finds that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons. Excellent risk-adjusted performance also influences the rating. This can be seen in the fund's five-year alpha calculated relative to the category index, which suggests that the process was successful over that period. 

The investment strategy as stated in the fund's prospectus is:  The investment seeks to provide investment results that correspond to the price and yield performance of the MSCI China All Shares Index.  Under normal circumstances and the fund will invest at least 80% of its net assets (plus borrowings for investment purposes) in instruments in its underlying index or in instruments that have economic characteristics similar to those in the underlying index. The underlying index is a free float adjusted market capitalization weighted index designed to measure the performance of Chinese exchange-listed equity securities. 

 The portfolio is overweight in financial services and energy relative to the category average by 5.6 and 3.2 percentage points, respectively. The sectors with low exposure compared to category peers are technology and communication services, underweight the average by 9.0 and 5.0 percentage points of assets, respectively. The portfolio is composed of 206 holdings and is diversified among those holdings. In its most recent portfolio, 25.7% of the fund’s assets were concentrated in the top 10 fund holdings, compared to the category’s 36.9% average. And in closing, in terms of portfolio turnover, looking at year-over-year movements, 55% of the fund's holdings have changed, whether through increasing, decreasing, or changing a position.

Above Average

Process

Kraneshares’s team earns a Low People Pillar rating. The most substantial detractor from the rating is the turnover of talent across its parent firm. The firm's asset-weighted manager tenure of five years suggests it could do more to retain portfolio managers. The combined average five-year excess return of each manager also detracts from the team. It indicates that the funds they manage have underperformed their respective category's average return. The parent firm's five-year success ratio of 50% further detracts from the team. The measure indicates the percentage of a firm's funds that survived and outperformed their respective category's median return for the period. The parent's relatively low success ratio suggests that the firm could do better across its fund lineup.

People

Kraneshares has a ways to go to become an industry-standard steward, resulting in a Low Parent Pillar rating. Despite the negative rating, an area of strength of the firm is manager investment.  Over 29% of the firm's assets are covered by invested managers, in an effort to align portfolio manager and shareholder interests. Kraneshares's longest-tenured managers do not possess the same experience as management teams at other firms, a detractor from its rating. Specifically, average asset-weighted tenure within the firm is only five years.

Parent

KraneShares MSCI All China Index ETF

KALL tracks a market cap-weighted index of large- and mid-cap Chinese stocks. The fund includes A- and B-shares, as well as Chinese stocks listed in Hong Kong (H-shares, Red chips, and P-chips).

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News for KraneShares MSCI All China Index ETF ETF (KALL)