Weakness in KraneShares Dynamic Emerging Mkt Str ETF's People and Process Pillar ratings limits this strategy to a Morningstar Medalist Rating of Negative. The portfolio maintains a cost advantage over competitors, priced within the least expensive fee quintile among peers.  

 The longest-tenured manager has a wealth of experience, but due to other weaknesses, the strategy earns a Low People Pillar. The strategy earns a Low Process Pillar rating.  Momentum is the premise that stocks that have recently outperformed will continue to do so. With low momentum exposure, the portfolio is holding stocks that managers believe to be undervalued. And a low quality exposure is rooted in stocks with higher financial leverage and lower profitability. Although this strategy's parent firm still has a way to go to be a high-quality steward, it has bright spots like substantial personal investments from managers but could focus on a bench of limited-tenure portfolio managers. As a result, the firm has a Low Parent Pillar.

Analyst Rating

Krane Shares Trust - KraneShares MSCI China All Shares Index ETF

Krane Shares Trust - KraneShares MSCI Emerging Markets ex China Index ETF

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 Dynamic Emerging Mkt Str ETF earns a Low Process Pillar rating. 

The main driver of the rating is the parent firm's five-year retention rate of 54%, which suggests it could do more to hold onto its portfolio managers. The parent firm's five-year risk-adjusted success ratio of 50% also limits the process. The measure indicates the percentage of a firm's funds that survived and beat their respective category's median Morningstar Risk-Adjusted Return for the period. The parent's relatively low success ratio suggests that the firm could do better across its fund lineup. Lastly, being an actively managed strategy detracts from the process. Historical data, like Morningstar's Active/Passive Barometer, shows that actively managed funds have generally underperformed their passive counterparts, especially over longer time horizons.

 This strategy, over time, has consistently held more undervalued companies, compared with peers in the Diversified Emerging Mkts Morningstar Category. But in terms of size exposure, it is similar to the average. Examining additional factor exposure, this strategy has consistently had low exposure to momentum stocks in the past few years. Momentum investors tend to expect stocks that have done well recently to continue to do so in the short term. Momentum approaches can entail higher turnover and trading costs since the top stocks can often change. In the latest month, the strategy was also less exposed to the Momentum factor compared with Morningstar Category peers. The strategy has also had a defensive tilt, demonstrated by lower exposure to the quality factor than peers in recent years. This means the fund has avoided holding companies that are consistently profitable, growing, and have solid balance sheets. Such positions do not tend to provide much ballast for a portfolio. Similarly, in recent months, the strategy also had less exposure to the Quality factor than peers. Additionally, this strategy has exhibited a tilt toward low-volatility stocks in these years, meaning companies with a lower historical standard deviation of returns over its peers. These companies have historically been a valuable ballast to steady portfolio returns during market downturns. 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 financial services by 2.6 percentage points in terms of assets compared with the category average, and its consumer defensive allocation is similar to the category. The sectors with low exposure compared to category peers are technology and industrials, with technology underweighting the average portfolio by 8.4 percentage points of assets and industrials similar to the average. The strategy has only reported a handful of holdings, and is in a category where the typical fund has approximately 25.3% of assets concentrated in the top 10 holdings.

Process

KraneShares Dynamic Emerging Mkt Str ETF earns a Low People Pillar rating. The most important driver of the rating is the instability 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 managers' failure to consistently outperform peers at the funds they run, as measured by their combined three-year manager excess returns, also detracts from the team. 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 beat 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.


Jonathan Shelon’s veteran status, with 21 years of listed portfolio management experience, brings a wealth of experience to the table. The average Morningstar Rating of the strategies they currently manage is 2.7 stars, indicating that their risk-adjusted returns have underperformed the category average. Jonathan Shelon has an experienced backdrop of support. The three listed managers boast 10 years of average listed portfolio management experience. None of the managers here invest any money in the strategy, which is disappointing, as such investments help align managers' interests with fundholders.

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 Dynamic Emerging Markets Strategy ETF

KEMET Corporation, as we know it today, was officially formed on December 21, 1990. However, the history of KEMET actually began a long time ago.  Kemet Laboratories was established by Union Carbide Corporation in 1919 to purchase the Cooper Research Company of Cleveland, Ohio, which had invented a promising high-temperature alloy. The name ''KEMET'' is a blend of the words ''chemical'' and ''metallurgy.'' KEMET's first product used this high-temperature alloy for grid wires in vacuum tubes. In 1930, the product line was expanded to include barium-aluminum alloy getters, an essential element in vacuum tubes.  KEMET's development of automatic machinery allowed production of high-quality getters in the huge quantities needed to match the rapid expansion of vacuum tube usage. In fact, it is estimated that over 80% of the vacuum tubes used by the Allies during World War II contained KEMET getters.  The business continued to grow and prosper until the early 1950s when Bell Telephone Laboratories invented the transistor. As the transistor began to displace vacuum tubes in electronics, the getter business stagnated. Fortunately for KEMET, Bell Laboratories had also invented the solid tantalum capacitor, which complemented the use of low-voltage transistors (semi-conductors) in electrical circuits. Since Union Carbide had experience in the fields of high-temperature metals and alloys, the solid tantalum capacitor was chosen as KEMET's ''new product'' to complement the getter product line and to provide the vehicle for future growth.

KEM is an actively managed fund-of-funds that seeks capital growth. The fund aims to outperform broad emerging markets while attempting to lessen downside risk through dynamic allocations between two emerging markets ETFs and cash.

KraneShares MSCI All China Index ETF

KraneShares MSCI Emerging Markets ex China Index ETF

Emerging markets equities and the related ETFs have long been responsive to Federal Reserve decisions on U.S. interest rates. This indicates that if the central pares rates this year, some upside could be in store for those long-lagging assets.

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Hello! This is MarketWatch reporter Isabel Wang bringing you this week's ETF Wrap. In this week's edition, we look at ETF strategies that have exploded in popularity in 2023, and whether they will continue to gain momentum in the year ahead.

These ETF strategies were big winners in 2023. Here's where one CFRA analyst sees them going next year.

Krane Funds Advisors (KraneShares) has launched the actively managed KraneShares Dynamic Emerging Markets Strategy ETF (NYSE Arca: KEM). KEM provides exposure to broad emerging market equities while dynamically adjusting its weight to China based on real-time signals.

KraneShares Launches Dynamic Emerging Markets Strategy ETF

NEW YORK, Aug. 25, 2023 (GLOBE NEWSWIRE) -- Krane Funds Advisors, LLC ("KraneShares"), an asset management firm known for its China-focused exchange-traded funds (ETFs) and innovative investment strategies, today announced the launch of the KraneShares Dynamic Emerging Markets Strategy ETF (Ticker: KEM) on the New York Stock Exchange.

News for Kraneshares Dynamic Emerging Markets Strategy ETF ETF (KEM)