Belt Road ETF brings new way to tap China infrastructure

The first Belt Road ETF has been listed on the New York Stock Exchange, launched by Krane Funds Advisors LLC, a US asset management firm.

Known as the KraneShares MSCI One Belt One Road ETF (ticker: OBOR), the ETF tracks the price and yield performance of the MSCI Global China Infrastructure Exposure Index. The index is designed to represent the performance of listed companies with high revenue exposure to Chinese infrastructure development related to the Belt Road initiative.

“We believe the Belt Road initiative is creating a new paradigm in global investing,” says Jonathan Krane, chief executive officer at KraneShares, in a note. “The Belt Road initiative will receive trillions of dollars of investment over the next decade and should increase the economies and trade of both China and the participating nations.”

The MSCI Global China Infrastructure Exposure Index is modified so that 45% of the weight is allocated to Chinese issuers, according to the ETF’s prospectus. The weight given to countries other than China is capped at 10%, and as of August 31 country weights include Singapore (10%), Malaysia (8%), Israel (6%), Russia (6%), and to a lesser extent Thailand, Philippines, India and Poland, among others.

In terms of sector, as of August 31 the industry weights include industrials (40%), materials (24%), utilities (16%), energy (11%) and financials (9%).

“The MSCI Global China Infrastructure Exposure Index highlights MSCI's commitment to designing innovative benchmarks for global investors,” says Christine Berg, managing director at MSCI, in a note. “This index aims to capture the performance of wide-ranging global infrastructure investment opportunities represented by China's One Belt One Road initiative.”

Twenty percent of the assets of the ETF can be invested in instruments not included in the MSCI Index, according to the prospectus. The ETF has 92 holdings (excluding cash) as of inception date September 7 and may include China A-shares, B-shares, H-shares, N-shares, as well as P-chips and Red chips. The top three stock holdings as of inception are Overseas Chinese Banking Corporation, Rosneft Oil, and China State Construction.

The ETF continues KraneShares’ China ETF theme, which includes the KraneShares Bosera MSCI China A Share ETF and the KraneShares CSI China Internet ETF.

The OBOR ETF has an expense ratio of 0.79% per year (US$79 on a US$10,000 investment).

The announcement comes as The Asset hosts its 3rd ETF Asia Summit in Taiwan. Click here to catch up on the event.