KraneShares offers two ETFs that provide exposure to private-market investment characteristics and select private companies through liquid ETF structures: the KraneShares Man Buyout Beta Index ETF (Ticker: BUYO) and the KraneShares Artificial Intelligence & Technology ETF (Ticker: AGIX).

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Hybrid public-private exchange-traded funds (ETFs) aim to provide exposure to select private companies, while leveraging the liquidity and transparency of public markets.

But what if investors aren’t actually realizing the upside they expect from those private companies, and/or are underperforming in the public portion of their portfolio because of how each component is structured?

If the private portion of a hybrid ETF isn’t structured effectively, investors may not obtain the exposure characteristics they expect from private‑market investments. It’s also important to remember that at least 85% of a hybrid ETF’s portfolio is typically invested in liquid public markets.¹ When that portion is not constructed effectively, it can potentially affect the fund’s overall performance in unintended ways.

Avoiding Negative Surprises in Hybrid Portfolios

Some hybrid ETFs have struggled to deliver on expectations, and have led some people to question the concept. But we believe the idea of combining public and private market exposure remains sound when executed thoughtfully.

If your goal is exposure to specific private companies rather than an opaque, pooled structure, it can be far more effective to participate directly on that company’s capitalization table rather than through a layered vehicle such as a special purpose vehicle (SPV). Direct exposure provides clearer ownership rights, potentially lower fees, and more transparent alignment with the underlying company’s performance.

In comparison, some hybrid structures may have limited transparency, added complexity, and additional costs that make it challenging for investors to clearly assess where value creation is occurring. Understanding how private exposure is structured and how it contributes to a portfolio is key when evaluating the role such investments are intended to play, particularly given their lower liquidity.

The Importance of the Public Side

Even for hybrid ETFs with private market allocations, the majority of the portfolio remains in publicly traded securities. This makes portfolio construction on the public side crucial. Chasing the “hot” private opportunities while neglecting the broader public equity exposure can lead to uneven outcomes.

That’s where the experience of a skilled fund manager or sub-advisor matters, one who can manage diversified* portfolios and apply risk management processes across different market environments.

Beyond Tech: The Broader Private Equity Lens

Some hybrid ETFs focus narrowly on sectors such as software, AI, or other innovation-driven themes. Yet private equity (PE) as an asset class provides exposure to far more than technology; it includes industrials, healthcare, consumer, and other sectors that provide diversification* and resilience across market cycles.

While some of the software and technology companies that have been selling off in late 2025 and early 2026 may eventually rebound, the recent sector volatility has highlighted the importance of avoiding overconcentration and building balanced exposure across industries.

KraneShares offers two ETFs that provide exposure to private-market investment characteristics and select private companies through liquid ETF structures:

Access Private-Equity-Related Investment Drivers With BUYO

For investors seeking exposure to the characteristics of companies targeted by PE, rather than direct ownership of specific private companies, there are now liquid strategies available.

These approaches use quantitative models to identify and mimic the exposures that have historically been observed in private equity investing. KraneShares partnered with Man Group, the world's largest publicly traded hedge fund manager and an alternative investments specialist, to launch the KraneShares Man Buyout Beta Index ETF (Ticker: BUYO).² BUYO seeks to provide exposure to selected PE return drivers through a liquid, transparent ETF structure. This method can be thought of as a “smart beta” approach for PE, providing access to PE-like risk premia within a public market vehicle.

Just as ETFs exist to track broad asset classes like U.S. large-cap equities, emerging markets, or fixed income segments, investors can now access selected PE return drivers through a liquid ETF structure.

Access Select Private Companies With AGIX

For investors seeking direct ownership of select private innovators, including Anthropic and SpaceX, as well as a public equity sleeve with risk controls and index-based construction, KraneShares has a potential solution.

KraneShares partnered with Etna Capital Management, founded by AI-native engineers and investors that are embedded in today's AI ecosystem, to launch the KraneShares Artificial Intelligence & Technology ETF (Ticker: AGIX). Since its inception on 7/17/2024, AGIX has delivered notable outperformance relative to the Nasdaq-100 Index, which is a major technology and AI benchmark, returning +39.09% versus 27.54% over the same period.³ Additionally, AGIX's lower overlap with crowded mega-cap tech and focus on emerging AI companies across hardware, infrastructure, and applications is highlighted by having just a 50.20% holdings overlap with the Nasdaq-100 Index.⁴

The performance data quoted represents past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed or sold, may be worth more or less than the original cost. Current performance may be lower or higher than the performance quoted. For performance data current to the most recent month end, please visit AGIX.

By systematically targeting companies with Etna's proprietary AI Exposure Score, AGIX has identified AI-related opportunities that may be underrepresented in broad tech indices such as the Nasdaq-100 Index. Importantly, AGIX’s private market sleeve is designed to complement, not overshadow, its public equity core, which remains the majority of the portfolio.

Just as investors can now access characteristics of companies targeted by PE through BUYO — AGIX offers a differentiated approach to marrying public and private markets through a liquid, exchange-traded format.

Conclusion

Hybrid ETFs hold promise but also pitfalls, particularly when their private allocations are structured through SPVs, or when the public side fails to complement the total portfolio exposure. We believe investors should remain mindful that these structures are complex and require disciplined design to deliver the intended exposure and portfolio characteristics.

BUYO seeks to offer a broad-based, fully liquid avenue that provides exposure to a subset of public equities that feature the key characteristics of companies historically held in PE/buyout funds. Alternatively, AGIX takes a more concentrated approach, blending public and private investments tied to the AI ecosystem. For investors seeking exposure to private-market characteristics or select private companies within a liquid, publicly traded ETF wrapper, these strategies offer two distinct yet complementary approaches.

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John Lidington is a Portfolio Manager at Numeric Investors LLC of Man Group and Portfolio Manager of the KraneShares Man Buyout Beta Index ETF (NYSE: BUYO).

For BUYO standard performance, top 10 holdings, risks, and other fund information, please click here.

For AGIX standard performance, top 10 holdings, risks, and other fund information, please click here.

*Diversification does not ensure a profit or guarantee against a loss. AGIX and BUYO are non-diversified. The statement regarding diversification refers to sector exposure, not regulatory diversification under the Investment Company Act of 1940.

Citations:

1. Regulatory Cap: SEC Rule 22e-4 restricts open-end funds and ETFs to holding a maximum of 15% of their net assets in illiquid investments. Target Assets: The 15% illiquid portion often targets private equity, venture capital, or private debt for higher growth potential.
2. Data from "Managing the World’s Largest Publicly Traded Hedge Fund: Man Group CEO Robyn Grew," Goldman Sachs.
3. Data from Bloomberg as of 2/28/2026.
4. Data from Bloomberg as of 12/31/2025.

Index Definitions:

Nasdaq 100 Index: The Nasdaq 100 tracks the performance of 100 of the largest and most actively traded stocks on the Nasdaq exchange, with a technology sector focus.

Solactive Etna Artificial General Intelligence Index: The Solactive Etna Artificial General Intelligence Index is designed to capture the performance of global securities with a high business exposure to the AI business. This includes companies active in the provision of AI Hardware, AI Infrastructure and AI Applications.

Definitions:

Capitalization Table (Cap table): A record of a company’s owners and their ownership percentages, showing how equity is distributed among shareholders and investors.

Special Purpose Vehicle (SPV): A separate legal entity created for a specific investment purpose, often used to hold a single private investment or group of assets.

Quantitative Models: Data-driven mathematical and statistical strategies used to identify patterns or factors that influence investment performance.

Smart Beta: A rules-based investment approach designed to capture specific factors such as value, momentum, or quality rather than simply tracking a market index.

Beta: A measure of how an investment moves relative to the overall market, used to describe its risk and return characteristics.