KraneShares S&P Pan As Div Arstcrts ETF earns a Morningstar Medalist Rating of Neutral with strength in areas such as Process offset by weaker spots such as People. The strategy charges fees in line with its similarly distributed peers, priced within the middle quintile.  

 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 a considerable overweight position in yield exposure and has a significant underweight in liquidity exposure compared with category peers. High yield exposure is attributed to holding high dividend-paying or buyback stocks, and is suitable for income seekers outside of fixed-income. And a low liquidity exposure is rooted in stocks with lower trading volumes, limiting managers' flexibility. Although this strategy's parent firm still has a way to go to be a high-quality steward, it has bright spots like considerable personal investments from managers but could focus on a relatively inexperienced portfolio management team. As a result, the firm obtains a Low Parent Pillar.

Analyst Rating

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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 S&P Pan As Div Arstcrts ETF earns an Above Average Process Pillar rating. 

The largest 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. 

 This strategy skews toward smaller, more value-oriented companies than its average peer in the Diversified Pacific/Asia Morningstar Category. Examining additional factor exposure, the managers have consistently overweighted yield-paying companies compared with Morningstar Category peers in recent years, shown by the portfolio's high exposure to stocks paying dividends or buying back shares. Higher-yield stocks can provide dependable income, but also have their risks. Dividend payers may cut payouts, for instance, if their earnings fall. In recent months, the strategy was more exposed to the Yield factor compared with its Morningstar Category peers as well. This strategy has also exhibited an overweight liquidity risk tilt, evidenced by holding companies with relatively lower trading volumes than peers in these years. Less-liquid stocks might offer strong returns to compensate for their risks, but they can be harder and more expensive to trade in bear markets. Similarly, in recent months, the strategy also had less exposure to the Liquidity factor than peers. Additionally, this strategy has demonstrated a tilt toward low-volatility stocks in these years, meaning companies with a lower historical standard deviation of returns over its peers. Such holdings can limit a strategy's downside, but cause it to lag in bull markets. In recent months, the strategy also had less Volatility factor exposure than its peers. More information on a fund and its respective category's factor exposure can be found in the Factor Profile module within the Portfolio section. 

 The portfolio is overweight in utilities and real estate relative to the category average by 10.4 and 8.2 percentage points, respectively. The sectors with low exposure compared to category peers are industrials and technology, underweight the average by 10.0 and 8.7 percentage points of assets, respectively. The portfolio is positioned across 104 holdings and is relatively top-heavy. Of the strategy's assets, 34.6% are concentrated within the top 10 holdings, as opposed to the typical peer's 18.5%. And in closing, in terms of portfolio turnover, looking at year-over-year movements, 35% 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 main factor affecting 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 shows that the funds they manage have lagged their respective category's average return. The parent firm's five-year success ratio of 50% further holds the team back. 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 modest 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 S&P Pan Asia Dividend Aristocrats ETF

KDIV tracks an index of the highest dividend-yielding companies from the S&P Pan Asia Broad Market Index that have increased dividends for at least 7 consecutive years. Constituents are selected and weighted by dividends.

In a subdued year for developed market equities, investors increasingly look to emerging markets for more substantial growth in the second half. First half volatility risk still looms for EM however, and finding strategies that capture growth and hedge defensively for volatility will prove advantageous.

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Tensions between China and the U.S. continue to take the media mainstage this year in an environment of continued geopolitical risk. Despite muted flows into China-focused funds this year, the country maintains its position as the most researched within EM countries by advisors on the VettaFi platform.

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Dividends remain a compelling buy for a turbulent second-half fraught with U.S. recession risk and continued global slowing. The dividend aristocrats strategy is appealing in economic downturns for the reliable income potential for portfolios as well as stability of the underlying securities.

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On top of market volatility, this year is ratcheting up political pressure between China and the U.S. It's little surprise that the top-performing funds from the lineup of KraneShares' ETFs largely focus beyond China, given the macro environment. KraneShares offers a range of ETFs that target China, the U.S., and climate strategies.

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Emerging and developing Asia is the only region of the world forecast for greater than 5% GDP growth this year while global real GDP is estimated at just 2.8% according to the International Monetary Fund.

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As a decade of low-interest rates ends, investors are increasingly searching for income, in addition to growth in their portfolios. Adding dividend growers to an investment portfolio may result in lower volatility, compounded growth on dividend reinvestment, and dampened drawdown in declining markets.

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One of the few bright spots for equity investors this year is dividend investing, as both high dividend and payout growth strategies, broadly speaking, are outperforming the broader market. Indeed, S&P 500 payouts are climbing to new highs, underscoring the importance of dividend growth and its benefits as an inflation-fighting tool.

To Asia for Aristocratic Dividends

KraneShares has announced the launch of its latest ETF, the KraneShares S&P Pan Asia Dividend Aristrocrats ETF (KDIV), on the NYSE today.

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NEW YORK , Sept. 15, 2022 /PRNewswire/ -- Krane Funds Advisors, LLC ("KraneShares"), an asset management firm known for its global exchange-traded funds (ETFs) and innovative investment strategies, announced the launch of the KraneShares S&P Pan Asia Dividend Aristocrats ETF (Ticker: KDIV) on the New York Stock Exchange today.

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