KraneShares Launches Buffered China Internet ETFs
KraneShares, the China-focused asset manager with $6.4 billion in 28 ETFs, launched two funds focused on China’s internet sector, as the world's second-biggest economy takes steps to bolster its battered economy.
The so-called defined outcome funds, which seek to protect investors from falling asset prices, began trading Feb. 8. The KraneShares 100% KWEB Defined Outcome January 2026 ETF (KPRO) and the KraneShares 90% KWEB Defined Outcome January 2026 ETF (KBUF) both dropped less than 1% Feb. 9.
The two funds, also known as buffered ETFs, aim to offer downside protection for investors and are comprised of tech stocks that give exposure to China’s internet sector, according to the company’s press release.
“We are seeing a record valuation disparity between the U.S. and China and think now is the time to invest,” said Jonathan Shelon, chief operating officer of KraneShares in a statement.
KraneShares is majority-owned by China Investment Capital Corporation, known as CICC, whose ownership structure includes ties to the Chinese government.
While investors have historically looked to China as a key emerging market investment opportunity, many China-exposure ETFs have performed poorly in past months. The largest China ETF, the $5.8 billion iShares MSCI China ETF (MCHI), which includes Chinese equities, is down 8.5% year to date, adding to losses of 11% that the index took last year. In addition, the KraneShares CSI China Internet ETF (KWEB), has been down 5.4% on top of 2023’s 9% downturn.
China ETFs Flounder
Investors subsequently have pulled out $1 billion out of U.S. listed China ETFs in the past year, according to Bloomberg. Regulatory crackdown on Chinese tech companies, geopolitical instability, and economic lagging are largely responsible for the downturn in many Chinese stocks.
The defined outcome strategy gives investors access to options strategies without purchasing options or structured notes, according to the company. KRO gives 100% downside protection, while KBUF gives 90% downside protection.
Despite the recent poor performance of many China-based ETFs, KraneShares argues that the tech sector especially is poised for growth. The company China Investment Capital Corporation (CICC), which is a Chinese financial services firm, owns a majority stake in KraneShares.
“China’s E-Commerce market size in 2022 was $2 trillion, twice that of the US,” said Jonathan Krane, CEO of KraneShares. “We believe KPRO and KBUF will prove just as attractive to investors seeking to access the China internet growth opportunity but with downside protection.”
Contact Lucy Brewster at lucy.brewster@etf.com.
