China Firm Buys KraneShares Stake

July 13, 2017

Tuesday saw the announcement of a major deal for KraneShares. The firm says it has signed an agreement to sell a 50.1% majority stake in the company to China Investment Capital Corporation (CICC), a China-based financial services firm with subsidiaries in New York, London, Hong Kong and Singapore.

KraneShares is a fairly small boutique-style ETF issuer offering only five funds and barely scraping into the top 40 of U.S.-based ETF issuers, with $765 million in assets under management. However, the firm is laserlike in its focus on China.

Pure-Play Exposure

The firm’s largest fund is the KraneShares CSI China Internet ETF (KWEB), with $542.2 million. It is the only fund to offer pure-play exposure to China’s internet companies.

The acquisition by CICC will lend the small ETF issuer some bigtime firepower when it comes to resources and research, but it also gives CICC an entry into the exploding U.S. ETF market. However, most of that growth is being seen at the largest players, especially the triumvirate of Vanguard, BlackRock and State Street at the top. Smaller firms like KraneShares have been seeing increasing obstacles to growth.

“CICC and KraneShares are both singularly focused on China. We share the same mission of building a trusted bridge of financial knowledge and expertise between the United States and China. We believe the combined company will be the premier source for China investment products and research globally,” said KraneShares CEO Jonathan Krane in a press release.

Purchasing Trend

The deal follows a trend of larger firms buying smaller ETF issuers as a way of entering the space. Such issuers come with their already-approved exemptive relief in hand, meaning the purchasing company doesn’t have to go through the sometimes-lengthy process, not to mention the ready-made infrastructure and expertise an established ETF issuer brings to the table.

In recent years, IndexIQ was bought by New York Life Investment Management, and Oppenheimer Funds acquired RevenueShares. Columbia Threadneedle Investments acquired Emerging Global Advisors last year.

KraneShares launched its first ETFs in 2013.

Contact Heather Bell at [email protected]

 

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