Krane Funds Advisors, LLC ("KraneShares"), a global asset
management firm known for its innovative exchange-traded funds
(ETFs), today announced the launch of the KraneShares Man Buyout
Beta Index ETF (Ticker: BUYO) on the New York Stock Exchange.
BUYO seeks to track the performance of the Man Buyout Beta
Index, which is designed to apply the key return drivers of
PE/buyout funds to public equities. The fund employs a systematic
approach to select a portfolio of small to mid-cap stocks from the
Russell 2500 Index, targeting industries favored by PE firms and
companies that are similar in size and display similar
company-specific characteristics as those in traditional PE funds.
The BUYO ETF targets companies with the following
characteristics:
- Belong to sectors favored by PE
funds, including Information Technology, Consumer Discretionary,
Industrials, and Health Care
- Filters for companies with
characteristics favored by PE funds, including strong free cash
flow yield, higher operating margins, cash discipline (lower CapEx,
ability to repay debt), and top-line growth among dozens of other
signals
As a starting point, the Russell 2500 Index without filtering
holdings for PE-like return drivers is already highly correlated to
the Preqin Private Equity ex-Venture Capital Index, with a 75.3%
historical total return correlation since 2008.1 BUYO is designed
to potentially have an even greater correlation and deliver a
return profile similar to that of traditional buyout funds longer
term.
"BUYO offers investors a unique way to access companies with
characteristics that private equity firms find attractive, but with
the liquidity and transparency of an ETF," said Kevin Orr, Managing
Director and Head of Strategic Partnerships at KraneShares. "By
leveraging Man Group’s research and expertise on buyout target
attributes, BUYO aims to capture the potential value creation
associated with private equity strategies while remaining fully
invested in public equities."
“Our research indicates that many of the same methodologies that
buyout funds use to target private takeover candidates can be
applied to the public equity market to achieve similar results,"
said John Lidington, who is a Co-Portfolio Manager covering liquid
private equity at Man Numeric, which is acting as sub-advisor to
BUYO. "We developed the approach underlying the Man Buyout Beta
Index to provide an opportunity to harness the key return drivers
powering PE funds, which are typically expensive and have
historically been difficult to access for many investors. The
approach helps identify potentially undervalued companies that in
many cases may become public to private takeout targets in the
future."
Major endowments typically allocate 20-40% of their portfolios
to private equity, with some top institutions like Ivy League
Universities reaching as high as 36.7% of their total investment.2
However, historically, there have been high barriers to entry to
traditional PE funds, such as long placement and lockup periods and
high investment minimums and fees.
“We believe BUYO offers a compelling solution for various
investor profiles,” said Jonathan Shelon, Chief Operating Officer
of KraneShares. “BUYO may be appropriate for institutional
investors seeking potential liquid beta to the PE buyout asset
class while awaiting placement in traditional PE funds. It may also
be attractive to investors seeking highly correlated liquid
alternative exposure to the PE market or investors looking to
diversify their portfolios by implementing a more endowment-like
asset allocation that includes a healthy weighting to PE-like
strategies.”
“We are excited to combine Man Numeric’s investment expertise –
by acting as a sub-advisor to BUYO – with KraneShares’ ETF product
development, marketing, and distribution capabilities,” said
Gregory Bond, CEO of Man Numeric.
KraneShares will host a webinar with John Lidington introducing
the KraneShares Man Buyout Beta ETF (Ticker: BUYO) on Tuesday,
November 12, 2024. Investors interested in attending the webinar
can register here.
About Man Group
Man Group is a global alternative investment management firm
focused on pursuing outperformance for sophisticated clients via
our Systematic, Discretionary and Solutions offerings. Powered by
talent and advanced technology, our single and multi-manager
investment strategies are underpinned by deep research and span
public and private markets, across all major asset classes, with a
significant focus on alternatives. Man Group takes a partnership
approach to working with clients, establishing deep connections and
creating tailored solutions to meet their investment goals and
those of the millions of retirees and savers they represent.
Headquartered in London, we manage $178.2 billion* and operate
across multiple offices globally. Man Group plc is listed on the
London Stock Exchange under the ticker EMG.LN and is a constituent
of the FTSE 250 Index. Further information can be found at
www.man.com.
*As of 30 June 2024
About KraneShares
KraneShares is a specialist investment manager focused on China,
Climate, and Alternatives. KraneShares seeks to provide innovative,
high-conviction, and first-to-market strategies based on the firm
and its partners' deep investing knowledge. KraneShares identifies
and delivers groundbreaking capital market opportunities and
believes investors should have cost-effective and transparent tools
for attaining exposure to various asset classes. The firm was
founded in 2013 and serves institutions and financial professionals
globally. The firm is a signatory of the United Nations-supported
Principles for Responsible Investment (UN PRI).
Citations:
- Source: Preqin Ltd and analysis by
Man Group as of 8/31/2024, correlation calculated from 1/1/2008 to
3/31/2024.
- Data from the National Association
of Independent Colleges and Universities, “What a Tough Private
Equity Environment Could Mean for University Endowments,” as of
7/17/2024.
Definitions:
Beta: Beta measures an investment's volatility relative to the
market and is used to quantify its risk. It's calculated as the
slope of a security's returns regressed against a benchmark market
index.
Index Definitions:
Preqin Private Equity ex-Venture Capital Index: The Preqin
Private Equity ex-Venture Capital Index represents the returns on
committed capital in private equity partnerships. It includes the
amount of money invested in these partnerships and the returns that
outstanding commitments would generate if invested risk-free.
Carefully consider the Funds’ investment objectives,
risk factors, charges and expenses before investing. This and
additional information can be found in the Funds’ full and summary
prospectus, which may be obtained by visiting:
https://kraneshares.com/buyo/. Read the prospectus
carefully before investing.
Risk Disclosures:
Investing involves risk, including possible loss of principal.
There can be no assurance that a Fund will achieve its stated
objectives. Indices are unmanaged and do not include the effect of
fees. One cannot invest directly in an index.
This information should not be relied upon as research,
investment advice, or a recommendation regarding any products,
strategies, or any security in particular. This material is
strictly for illustrative, educational, or informational purposes
and is subject to change. Certain content represents an assessment
of the market environment at a specific time and is not intended to
be a forecast of future events or a guarantee of future results;
material is as of the dates noted and is subject to change without
notice.
The Underlying Index uses Numeric models in its methodology,
which depend on various data sources that may be inaccurate or
incomplete, rendering the models potentially unreliable. Historical
market data may not predict future price movements, and unusual
market events can lead to unexpected outcomes. Models may also have
hidden biases and could incur losses if actual events diverge from
their assumptions. Additionally, performance may be affected by
software issues or programming errors. While the Underlying Index
aims to reflect private equity performance and risk like private
equity buyout funds, there is no guarantee that public equities
will achieve this exposure or that the models will effectively
provide it.
The Fund may invest in derivatives, which are often more
volatile than other investments and may magnify the Fund’s gains or
losses. A derivative (i.e., futures/forward contracts, swaps, and
options) is a contract that derives its value from the performance
of an underlying asset. The primary risk of derivatives is that
changes in the asset’s market value and the derivative may not be
proportionate, and some derivatives can have the potential for
unlimited losses. Derivatives are also subject to liquidity and
counterparty risk. The Fund is subject to liquidity risk, meaning
that certain investments may become difficult to purchase or sell
at a reasonable time and price. If a transaction for these
securities is large, it may not be possible to initiate, which may
cause the Fund to suffer losses. Counterparty risk is the risk of
loss in the event that the counterparty to an agreement fails to
make required payments or otherwise comply with the terms of the
derivative.
The Fund is new and does not yet have a significant number of
shares outstanding. If the Fund does not grow in size, it will be
at greater risk than larger funds of wider bid-ask spreads for its
shares, trading at a greater premium or discount to NAV,
liquidation and/or a trading halt. Narrowly focused investments
typically exhibit higher volatility. The Fund’s assets are expected
to be concentrated in a sector, industry, market, or group of
concentrations to the extent that the Underlying Index has such
concentrations. The securities or futures in that concentration
could react similarly to market developments. Thus, the Fund is
subject to loss due to adverse occurrences that affect that
concentration. In addition to the normal risks associated with
investing, investments in smaller companies typically exhibit
higher volatility. BUYO is non-diversified.
ETF shares are bought and sold on an exchange at market price
(not NAV) and are not individually redeemed from the Fund. However,
shares may be redeemed at NAV directly by certain authorized
broker-dealers (Authorized Participants) in very large
creation/redemption units. The returns shown do not represent the
returns you would receive if you traded shares at other times.
Shares may trade at a premium or discount to their NAV in the
secondary market. Brokerage commissions will reduce returns.
Beginning 12/23/2020, market price returns are based on the
official closing price of an ETF share or, if the official closing
price isn't available, the midpoint between the national best bid
and national best offer ("NBBO") as of the time the ETF calculates
the current NAV per share. Prior to that date, market price returns
were based on the midpoint between the Bid and Ask price. NAVs are
calculated using prices as of 4:00 PM Eastern Time.
The KraneShares ETFs and KFA Funds ETFs are distributed by SEI
Investments Distribution Company (SIDCO), 1 Freedom Valley Drive,
Oaks, PA 19456, which is not affiliated with Krane Funds Advisors,
LLC, the Investment Adviser for the Funds, or any sub-advisers for
the Funds.
For media inquiries, please
contact: info@kraneshares.com
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