KraneShares Man Buyout Beta Index ETF (BUYO) Lists on NYSE: Applying Private Equity Selection Criteria To Public Equities

NEW YORK, Oct. 08, 2024 (GLOBE NEWSWIRE) — 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:

1. Belong to sectors favored by PE funds, including Information Technology, Consumer Discretionary, Industrials, and Health Care
2. 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:

1. Source: Preqin Ltd and analysis by Man Group as of 8/31/2024, correlation calculated from 1/1/2008 to 3/31/2024.
2. 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.

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