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12/04/2014 – New China ‘Paper’ ETF A Groundbreaker

By Dennis Hudachek | December 04, 2014

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On Wednesday, China ETF specialist KraneShares brought to market one of the more innovative ETF launches I’ve seen in years.

The new KraneShares E Fund China Commercial Paper ETF (KCNY) tackles a specific niche within China’s massive $5 trillion “onshore” bond market: commercial paper.

KCNY breaks new ground because it’s not only the first China commercial paper ETF, it’s the first U.S.-listed commercial paper ETF, period. There is currently no other ETF focused exclusively on commercial paper.

The fund tracks an index of “investment grade,” ultra-short-term Chinese sovereign and corporate debt that yields north of 4 percent. KraneShares said in regulatory paperwork that the fund’s average maturity is only 128 days.

This is significant because KraneShares is clearly aiming for a sliver of the trillions of dollars parked in U.S. money market funds earning little to no interest at the moment.

Having been a renminbi bull for years myself, I’m excited to see a renminbi-denominated fixed-income ETF aimed for capital preservation with such an attractive yield.

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