KraneShares, Virtus Roll Out Funds

October 12, 2017

Thursday’s launches included one fund apiece from issuers KraneShares and Virtus. The former rolled out an emerging markets consumer tech fund, while the latter debuted an active fund that uses a factor-based approach to stock selection.

Both funds list on the NYSE Arca exchange.

KraneShares’ KEMQ

The KraneShares Emerging Markets Consumer Technology Index ETF (KEMQ) tracks an index of 50 equities selected from emerging market companies falling under the consumer technology category in the FactSet Revere Business industry Classification system. Companies are selected from more than 25 emerging and frontier markets.

According to the prospectus, the methodology selects the 50 largest stocks fitting the index’s criteria, ranks them by market capitalization and then sorts them into weighting tiers. The 10 largest stocks in the index are each assigned a weight of 3.5%, while the next 20 stocks are assigned individual weights of 2.5% and the smallest 20 stocks are each weighted at 0.75%.

The prospectus notes that the component stocks of the index as of Sept. 14 ranged in size from $962 million to $454 billion and had an average market capitalization of $28 billion.

KEMQ comes with an expense ratio of 0.79%.

Virtus’ VGFO

The Virtus WMC Global Factor Opportunities ETF (VGFO) is actively managed and selects its stocks from both developed and emerging markets. The fund comes with an expense ratio of 0.49%.

Subadvised by Wellington Management Company, the fund uses a factor-based approach that relies on quantitative and qualitative research and analysis, the prospectus says. Among the factors it relies on, according to the fund documentation, are mean reversion, which targets stocks that are inexpensive based on their price history; trend following, meaning stocks that are seeing strong momentum and strong growth potential; risk aversion, meaning stocks that are stable and have good balance sheets and low volatility; and risk seeking, which can include higher-volatility stocks.

It also takes into account tail risk diversification when determining its regional and factor allocations in order to cushion the portfolio from downside risk.

The prospectus notes that the fund is required to offer exposure to at least five countries and that at least 30% of its assets must be invested in non-U.S. equities.

Beyond its factor-based methodology, VGFO stands out because it is the cheapest actively managed global ETF, coming in at a lower price point than the ClearBridge All Cap Gowth ETF (CACG), which charges 0.53% in expense ratio.

Contact Heather Bell at [email protected]

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