KraneShares and E Fund Management have launched the KraneShares E Fund China Commercial Paper ETF (NYSE: KCNY), the first commercial paper change traded fund in the United States.
KCNY seeks to deliver yields from investment-grade commercial paper issued in Mainland China by companies headquartered in China. The fund is aiming to provide an alternative to US investors’ money market fund and/or bank deposit program investments.
“China has a very flat yield curve with relatively high interest rates versus the US, specifically in maturities under one year. For example, over the past twelve months China commercial paper returned 5.85%+ in USD compared to US commercial paper at less than 0.20%, that’s a 5.65% difference,” says Jonathan Krane, CEO of KraneShares. “We partnered with E Fund Management, the largest fixed income manager in China and the second largest RQFII manager globally, to capture this spread and make it easy for investors to access via an exchange traded fund listed on NYSE.”
Gaohui Huang, CEO of E Fund Management Hong Kong, adds: “We believe that KCNY will be an excellent solution to the low yields currently being offered in US money market funds and bank deposit programs; an industry with $3 Trillion+ assets under management. China commercial paper provides an opportunity for global investors to diversify their cash positions, maintain an average maturity close to US money market funds and generate monthly income that has historically been much higher than US commercial paper.”
“China money market funds deliver investment-grade credit quality, very short average maturity of 100 days and yields north of 4.50%5. Our goal is to deliver a similar product to US investors in an ETF wrapper which provides intra-day liquidity and no minimums. We believe we’ve done that with KCNY,” says David Zhang, E Fund Management HK chief investment officer and co-portfolio manager of the Fund. “Chinese onshore commercial paper market has historically been very active and liquid, with more than $270 Billion USD outstanding and an average USD3 billion aily trading volume.”