KraneShares Global Carbon ETF

Carbon credits have a tailwind of government intentions to make them increasingly scarce and increasingly expensive. No other equity asset in our portfolios has a comparatively strong positive government tailwind.

The fund had $324,444,503 in total assets as of 05/12/21, which is a strong market adoption rate for a new fund less than 1 year old (inception 07/30/21). [AUM update 05/13/21: $337,723,721]

I reiterate my recommendation of this fund as a portfolio correlation diversifier with high likelihood of attractive price appreciation over the long-term.

The nice-looking chart below shows the price of KRBN from its inception July 30,2020, with the daily volume in green histogram bars below the price panel. The outer boundaries of the shaded areas around the price are 1, 2 and 3 standard deviations from the 50-day moving average.

The fund has outperformed the S&P 500, global diversified commodities, crude oil, and natural gas as shown in the 4 panels below where the performance of KRBN is divided by the performance of the other asset.

This set of chart shows the performance of six key assets in black, and the performance of each asset versus KRBN in red. In each case the position of the red line (asset performance divided by KRBN performance) is below the zero line, showing KRBN to be the outperformer.

The key assets outperformed by KBRN are:

• (SPY) S&P 500

• (VEA) Developed stock markets ex-USA

• (VWO)  Emerging markets stocks

• (VGIT)  Intermediate-term US Treasuries

• (DBC)  Diversified global commodities

• (USO)  Crude oil

KRBN has been trading at a premium to the underlying index since inception. I don’t have a good idea on whether its premium will persist or be moderated as the credits market and the fund grow. However, I do not expect the premium (or discounts) to become valuation problems over any moderate holding period.

The global carbon credits index itself was created in 2016 and is shown below. It did have a flattish period in the last half of 2018 and in 2019; and it did take a dive when COVID struck.

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Disclaimer: "QVM Invest”, “QVM Research” are service marks of QVM Group LLC. QVM Group LLC is a registered investment advisor.

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