KraneShares has launched a new thematic equity ETF in Europe providing exposure to the electric vehicles industry globally and related technology and component providers that are shaping the future of transportation and automated mobility.
Anthony Sassine, Senior Investment Strategist at KraneShares.
The KraneShares Electric Vehicles & Future Mobility ESG Screened UCITS ETF (KARS LN) has been listed on London Stock Exchange in US dollars.
The adoption of future mobility technologies is occurring at an increasingly rapid pace. According to Bloomberg’s New Energy Finance division (BloombergNEF), over half (54%) of new car sales and a third (33%) of the global car fleet are projected to be electric by 2040.
Morgan Stanley analysts, meanwhile, predict that the global electric vehicle market will command $2.7 trillion in total investment before 2040, while autonomous vehicles and the resulting “passenger economy” are expected to generate a cumulative $8 trillion in global revenues by 2050.
According to Anthony Sassine, Senior Investment Strategist at KraneShares, the firm’s latest ETF has been designed to capture the entire electric vehicles and future mobility thematic investment opportunity by taking a holistic approach to the segment.
Sassine noted: “KARS holds globally listed companies involved in the entire future mobility ecosystem including electric vehicle production, autonomous driving, shared mobility, lithium and copper production, lithium-ion batteries, hydrogen fuel cell manufacturing, and electric infrastructure.”
Xiaolin Chen, Head of International at KraneShares, added: “KARS provides diversified geographic exposure to the world’s electric vehicle leaders including China, Europe, and the US respectively. We believe global electric vehicle adoption will be a multi-decade secular investment opportunity that UCITS investors can now access through our ETF.”
Methodology
The fund is linked to the Bloomberg Electric Vehicles ESG Screened Index which is a more sustainability-enhanced version of the index underlying the US-listed KraneShares Electric Vehicles & Future Mobility ETF (KARS US). This fund debuted on NYSE Arca in January 2018 and has since accumulated $240 million in assets.
The index selects its constituents from a global universe of stocks with market capitalizations above $500m and average daily trading volumes greater than $5m. Companies embroiled in severe ESG-related controversies, violators of UN Global Compact principles, and firms deriving revenue from controversial weapons, civilian weapons, thermal coal, and tobacco are excluded.
The index harnesses Bloomberg’s thematic basket approach, searching beyond traditional industry divisions in order to identify companies relevant to an underlying theme.
A list of potential constituents is first drawn up by harnessing the insights of Bloomberg’s analysts in combination with the firm’s natural language processing tool that scours company documents for keywords related to the underlying theme. Proposed basket members are then back-tested to measure consistency in trading as a group.
According to Bloomberg, eligible companies must be classified as belonging to vehicles, electric vehicle components, batteries, hydrogen fuel cells, or raw materials sector classifications as determined by the Theme-Basket committee.
All eligible constituents are selected and weighted by float-adjusted market capitalization subject to a cap of 5% on each of the eight largest positions and a cap of 2.5% on any other stock. Reconstitution and rebalancing occur quarterly.
As of the end of 2021, the index contained 67 constituents with significant exposure to the consumer discretionary (45.1%) and information technology (22.8%) sectors followed by materials and energy at 16.0% and 13.0%, respectively.
Notable positions, each with a weight between 4% and 5.6%, included Ford Motor, Nidec, Tesla, Infineon Technologies, Contemporary Amperex Technology, Analog Devices, General Motors, and Daimler.
The ETF comes with an expense ratio of 0.72% and is classified as an Article 8 product under the European Union’s Sustainable Finance Disclosure Requirement (SFDR).