Asia Bond ETF: High Yield & Active Income Strategy | KHYB
by Kraneshares
Opportunities In The Asia High Yield Bond Market
Overview of the KraneShares Asia Pacific High Income USD Bond ETF (ticker: KHYB)
KHYB | 3/31/2026
Introduction
Investment Strategy:
KHYB is an active ETF managed by sub-advisor Amova Asset Management Americas, Inc. ("Amova"). KHYB is benchmarked to the JP Morgan Asia Credit Index (JACI) Non-Investment Grade Corporate Index. The fund provides exposure to USD-denominated high yield debt securities issued by companies in Asia.
Asia High Income Bond Market Features:
- The JP Morgan Asia Credit Index grew from a market capitalization of $257 billion in 2010 to $885 billion in March of 2026, an increase of 244%.
- The Asia high yield bond market currently offers higher yields than other global high yield bond markets. As of June of 2025, Asia high yield bonds had a yield of 8.6% compared to 7.3% for US high yield bonds.
- The default rate of Asia high-yield corporate bonds has been lower than that of high yield bonds in other emerging market regions in six of the past thirteen years and was lower than the US high yield default rate in both 2019 and 2020.
KHYB Features:
- Sub-advised by Amova. Formerly known as Nikko, Amova was established in 1959 and is one of Asia's largest asset managers, with over $200 billion in assets under management. Amova is a leader in Asia fixed income with 30+ years of experience in the market.
- KHYB portfolio manager Wai Hoong Leong is supported by one of the largest Asia fixed income teams. His team uses top-down macro research and bottom-up credit research to construct the Fund's portfolio.
Active Management
We believe the best actively managed investments are driven by the "three P's": Philosophy, People, & Process
Philosophy
The key tenets of Amova's investment philosophy are capital preservation, investing for the long-term, and value discipline. As markets are prone to behave inefficiently, Amova's team believes outperformance may be achieved through top-down macro and bottom-up credit research.
People
Wai Hoong Leong is the head of Asia credit and a portfolio manager with 26 years of experience. He is supported by a team of 16 investment professionals across rates, portfolio management, credit, and research, with, on average, 17 years of experience. The team includes ten CFA charter-holders and eight with advanced degrees.
Process
Amova's investment process combines top-down macro research with bottom-up fundamental credit research. The team's fundamental, valuation, and technical (FVT) framework results in a high-conviction portfolio consisting of the manager's best investment ideas. The portfolio construction process is followed by ongoing risk management procedure that includes risk identification, evaluation, mitigation, monitoring, and escalation.
Active Management
Why Active?
We believe that active management is appropriate for investing in Asia high yield bonds given the market's size, complexity, and tendency to undergo rapid changes owing to the low level of development of some of its country constituents.
An active manager may offer:
- Local expertise
- Familiarity with issuers
- Ability to invest tactically based on market conditions and individual issuers' circumstances
- Ability to base investments off credit quality, not indebtedness
- Research-driven investment process guided by investment professionals
Amova Asset Management offers:
- 30+ years of experience in the market
- One of the largest fixed-income teams in Asia
- The use of both quantitative and qualitative factors to guide investment decisions
- Local presence in Singapore
Market Size
The Asia Bond Market has witnessed steady growth over the last decade. The JP Morgan Asia Credit Index grew from a market capitalization of $257 billion in 2010 to $893 billion in December of 2025, an increase of 247%.
Total Market Capitalization – JP Morgan Asia Credit Index (JACI)
The chart shows annual market capitalization data from 2005 to Q1 2026, broken down into Investment Grade (IG) and Non-Investment Grade components.
- Current composition: IG (87%), Non-IG (13%)
- Key data points (IG / Non-IG in billions USD):
- 2010: $161B IG / $96B Non-IG
- 2019: $816B IG / $255B Non-IG
- 2021: $990B IG / $236B Non-IG
- 2025: $779B IG / $114B Non-IG
- 1Q 2026: $772B IG / $114B Non-IG
Market Size
Despite Asia ex-Japan representing nearly one-third of global GDP, the region makes up only 14% of the Bloomberg Global Aggregate Index.
Global bond indexes don't accurately reflect the rise and size of Asian economies.
Bloomberg Global Aggregate Index
The chart shows the percentage composition of the Bloomberg Global Aggregate Index by region:
- North America: ~40%
- Europe: ~28%
- Japan: ~9%
- China: ~11%
- Korea, Indonesia, Malaysia, Thailand, Singapore, Hong Kong, India, Others: each less than 5%
~30% of Global GDP — Asia ex-Japan collectively represents approximately 30% of global GDP but only 14% of the Bloomberg Global Aggregate Index.
Quality
Asian high yield issuers boast attractive interest coverage ratios.
In 2024, the average interest coverage ratio for the Asian high yield issuers in KHYB was 4x. Generally speaking, an interest coverage ratio of 2x is considered acceptable and an interest coverage ratio of 3x is considered good.
Interest Coverage Ratio (EBITDA/Net Interest Expense)
| Year | Ratio |
|---|---|
| 2014 | 4.6x |
| 2015 | 5.0x |
| 2016 | 5.5x |
| 2017 | 6.1x |
| 2018 | 6.1x |
| 2019 | 5.3x |
| 2020 | 4.6x |
| 2021 | 4.9x |
| 2022 | 4.7x |
| 2023 | 4.0x |
| 2024 | 4.3x |
Quality
Annual issuance reached a 10-year low in 2024 and continues to be constrained relative to history.
Annual Gross New Issuance - Asia USD High Yield
The chart shows annual gross new issuance of Asia USD High Yield bonds from 2017 to 2025 in billions of USD:
- 2017: ~$100B
- 2018: ~$62B
- 2019: ~$120B
- 2020: ~$100B
- 2021: ~$85B
- 2022: ~$21B
- 2023: ~$7B
- 2024: ~$3B (10-year low)
- 2025: ~$7B
Risk/Return
Many emerging Asian countries' real yields are positive as inflation is largely under control, potentially leading central banks to continue to cut rates.
This would make USD rates more attractive than local rates, leading to price improvements for USD high yield bonds.
Real Yield on 10-Year Government Bond
| Country | Real Yield (%) |
|---|---|
| India | ~5.5% |
| Philippines | ~5.2% |
| Indonesia | ~5.0% |
| Thailand | ~2.4% |
| Malaysia | ~2.3% |
| China | ~0.8% |
| Japan | ~-0.3% |
Real Yield = Yield to Maturity – CPI Inflation
Risk/Return
Both high yield and investment grade spreads in Asia are currently higher than spreads in the US and Europe, reflecting the higher yields on offer in Asia and lower policy rates.
Asia – Spread Difference vs. Developed Market Credit
Investment Grade Spreads (Basis Points)
Chart comparing Asia Credit IG, US Corp IG, and Euro Corp IG spreads from January 2015 to January 2025.
- Asia Credit IG spreads have generally been higher than US Corp IG and Euro Corp IG spreads throughout the period.
High Yield Spreads (Basis Points)
Chart comparing Asia Corp HY, US Corp HY, and Euro Corp HY spreads from January 2015 to January 2026.
- Asia Corp HY spreads have been significantly higher than US Corp HY and Euro Corp HY, particularly during 2021–2023.
IG = investment grade | HY = high yield
Despite higher yield and more opportunity for spread tightening, Asia ex Japan high yield duration is significantly lower than broad EM and US high yield.
Bond investors in Asia favor low duration, resulting in a lower average effective duration for Asia ex-Japan high yield bonds. A lower duration means the value of a bond is less impacted by a change in interest rates.
High Yield Historical Yield
J.P. Morgan JACI Non-Investment Grade historical yield chart showing yield to maturity (%) from Jan-11 to Jan-25, with reference lines for +2SD, +1SD, Mean, and -1SD.
High Yield Duration
Bar chart comparing duration (Years) across:
- EM: ~7 years
- US: ~3 years
- KHYB: ~2.5 years
Data from JP Morgan as of 3/31/2026. SD = Standard Deviation.
Data from Amova and Bloomberg as of 3/31/2026. EM = JP Morgan USD Emerging Markets High Yield Bond Index. US = ICE BofA US High Yield Index. Asia Ex Japan = JP Morgan Asia Credit Index Non-Investment Grade
Asia High Yield corporate bonds have a relatively low default rate compared to other global high yield markets.
The default rate of Asia high yield corporate bonds has been lower than that of high yield bonds in other emerging market regions in seven of the past eleven years and was lower than the US high yield default rate in 2019 and 2020. Regulatory tightening in the China property sector increased the default risks in Asia HY in 2021 and 2022. Default rates are expected to continue to decline in 2026.
EM Corporate HY Default Rates 2011 to 2026 Estimate
Bar chart comparing default rates (%) across regions from 2015 to 2026F:
- Asia, EM Europe, Latin America, ME&Africa, EM HY, US HY
Notable data points:
- 2021: Asia 13.3%
- 2022: Asia 16.9%
- 2023: Asia 10.0%
- 2024: Asia 5.4%
- 2025: Asia 3.5%
- 2026F: Asia 2.5%
EM = Emerging Markets, ME = Middle East, HY = High Yield
Default rates and default rate forecasts are from JP Morgan as of 3/31/2026. F = Forecast.
Asia High Yield Bond Market Characteristics
Asia High Yield offers relatively high yield with good credit quality that includes non-rated bonds from high-quality issuers in Asia.
Asia High Yield Bond Market
| Metric | Value |
|---|---|
| Index Market Size (USD) – JP Morgan Asia Credit Non-Investment Grade | 96 billion |
KHYB Characteristics
| Metric | Value |
|---|---|
| Weighted Average Duration (Years) | 2.61 |
| 30-Day SEC Yield (%) | 6.60% |
| 12-Month Distribution Rate (%) | 7.87% |
| Weighted Average Yield-to-maturity (%) | 9.28% |
| Number of Bonds | 66 |
Data from Amova Asset Management, KraneShares, JP Morgan, and Bloomberg as of 3/31/2026.
BPS = basis points
Asia High Yield Bond Market Characteristics
KHYB is mostly comprised of issuers in China, Macau, and India in the real estate, financial, and consumer sectors.
KHYB Country Breakdown
| Country | Allocation |
|---|---|
| Mainland China | 20.39% |
| India | 17.76% |
| Hong Kong | 14.92% |
| Macau | 9.71% |
| United States | 6.56% |
| Indonesia | 6.19% |
| Mongolia | 5.32% |
| United Kingdom | 4.90% |
| Pakistan | 4.39% |
| Thailand | 3.85% |
| Others | 6.01% |
KHYB Sector Breakdown
| Sector | Allocation |
|---|---|
| Real Estate | 29.84% |
| Financial | 25.36% |
| Metals & Mining | 7.88% |
| Sovereign | 6.63% |
| Cash | 6.56% |
| Consumer | 5.16% |
| Oil & Gas | 5.01% |
| Technology, Media, & Telecommunications | 3.78% |
| Industrials | 3.57% |
| Utilities | 6.19% |
Data from KraneShares, Amova, and Bloomberg as of 3/31/2026. TMT = Technology, Media, & Communications.
Conclusion
-
The JP Morgan Asia Credit Index grew from a market capitalization of $257 billion in 2010 to $885 billion in March of 2026, an increase of 244%.
-
Despite Asia ex-Japan representing nearly one-third of global GDP, the region makes up only 15% of the Bloomberg Barclays Global Aggregate Index.
-
Asia ex-Japan high yield bonds may offer attractive risk-adjusted returns driven by relatively higher yields, lower duration, and lower credit risk compared to other global high yield bond markets.
KraneShares Asia Pacific High Income USD Bond ETF
Investment Strategy
KHYB is an active ETF managed by sub-advisor Amova Asset Management Americas, Inc. ("Amova"). KHYB is benchmarked to the JP Morgan Asia Credit Index (JACI) Non-Investment Grade Corporate Index. The fund provides exposure to USD-denominated high yield debt securities issued by companies in Asia.
Fund Details (Data as of 3/31/2026)
| Detail | Value |
|---|---|
| Primary Exchange | NYSE Arca, Inc. |
| CUSIP | 500767843 |
| ISIN | US5007678437 |
| Total Annual Fund Operating Expense | 0.69% |
| Inception Date | 06/26/2018 |
| Distribution Frequency | Monthly |
| Performance Benchmark | JACI Non-Investment Grade Corporate Index |
| Management Style | Active |
| Number of Holdings | 77 |
Top 10 Holdings as of 3/31/2026
| Holding | % |
|---|---|
| VEDANTA RESOURCES FINANCE II PLC 10 7/8 09/17/29 | 2.72 |
| STUDIO CITY FINANCE LTD 6 1/2 01/15/28 | 2.57 |
| TRADE & DEVELOPMENT BANK OF MONGOLIA LLC 8 1/2 12/23/27 | 2.55 |
| FORTUNE STAR BVI LTD 5.05 01/27/27 | 2.53 |
| CS TREASURY MANAGEMENT SERVICES P LTD 9 PERP | 2.50 |
| MEDCO CYPRESS TREE PTE LTD 8 5/8 05/19/30 | 2.40 |
| STANDARD CHARTERED PLC 7 PERP | 2.30 |
| SAMMAAN CAPITAL LTD 8.95 08/28/28 | 1.64 |
| PIRAMAL CAPITAL & HOUSING FINANCE LTD MTN 7.8 01/29/28 | 1.64 |
| PIRAMAL CAPITAL & HOUSING FINANCE LTD/INDIA MTN 7.8 01/29/28 | 1.64 |
KHYB Performance History as of 3/31/2026
| Cumulative % | Average Annualized % | ||||||
|---|---|---|---|---|---|---|---|
| 3 Mo | 6 Mo | Since Inception | 1 Yr | 3 Yr | 5 Yr | Since Inception | |
| Fund NAV | -1.34% | 0.18% | 11.97% | 6.30% | 7.01% | -0.42% | 1.47% |
| Closing Price | -0.84% | 0.69% | 12.40% | 6.63% | 7.10% | -0.30% | 1.52% |
| JACI Non-Investment Grade Corporate Index | 0.15% | 1.48% | 13.33% | 6.49% | 6.85% | -1.33% | 1.62% |
Term Definitions
Yield To Maturity: The total anticipated return on a bond if it is held until it matures.
Weighted Average Duration: A calculation of the weighted average of the durations of fixed income instruments held in a portfolio.
Effective Duration: Effective duration is a duration calculation for bonds with embedded options. This measure of duration considers that expected cash flows will fluctuate as interest rates change and is, therefore, a measure of risk.
Default Rate: The default rate is the percentage of all outstanding loans that a lender has written off as unpaid after a prolonged period of missed payments.
Investment Grade: The term 'investment grade' refers to the quality of a company's credit. To be considered an investment grade issue, the company must be rated at 'BBB' or higher by Standard and Poor's or Moody's. Anything below this 'BBB' rating is considered non-investment grade or high yield.
High Yield: The term 'high yield' refers to the quality of a company's credit. To be considered a high yield issue, the company must be rated lower than 'BBB' by Standard and Poor's or Moody's. Anything 'BBB' or above is considered investment grade.
CPI Inflation: The Consumer Price Index (CPI) is a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care.
Interest Coverage Ratio: A debt and profitability ratio used to determine how easily a company can pay interest on its outstanding debt.
Real Yield: The return one can expect to receive on a bond investment accounting for inflation.
Yield to Maturity: The return an investor can expect to receive over the lifetime of a bond.
EBITDA: Earnings before interest, taxes, depreciation, and amortization.
Standard Deviation: A measure of the amount of dispersion of variation or dispersion of a set of values.
30-Day SEC Yield: A standard yield calculation developed by the U.S. Securities and Exchange Commission (SEC) that allows for fairer comparisons of bond funds.
12-Month Distribution Rate: The distribution rate an investor would have received if they had held the fund over the last twelve months, assuming the most recent NAV.
Gross Annual New Issuance: The change in the amount of debt outstanding in the market, which can change with the issuance of new debt and the maturation of debt contracts in the market.
Spread: The difference between the yield of a bond with credit risk and the applicable risk-free rate.
Index Definitions
J.P. Morgan Asia Credit Index (JACI) Corporates Non-Investment Grade Index: Consists of liquid US-dollar denominated debt instruments issued out of Asia ex-Japan. It is based on the composition and established methodology of the J.P. Morgan Asia Credit Index (JACI), which is market capitalization weighted. The index is limited to issuers classified as non-investment grade based on the middle rating between Moody's, Fitch, and S&P.
JP Morgan Asia Credit Index Non-Investment Grade: The JACI Core consists of liquid US-dollar denominated debt instruments issued out of Asia ex Japan. Requires a minimum $350 million in notional outstanding and a minimum remaining maturity of 2 years. Historical returns available from December 30, 2005.
JP Morgan Asia Credit Index Investment Grade: The JACI Core investment grade version is limited to issuers classified as investment grade based on the middle rating between Moody's, Fitch, and S&P.
JP Morgan US High Yield Index: Provides a comprehensive, accurate representation of the US high yield market and its components.
JP Morgan US Liquid Index: Provides a comprehensive, accurate representation of the investment grade market. Corporate bonds rated Baa3/BBB- or higher with issue sizes of at least $300 million qualify for inclusion.
JP Morgan USD Emerging Markets High Yield Bond Index: Tracks liquid, US Dollar emerging market fixed and floating-rate debt instruments issued by corporate, sovereign, and quasi-sovereign entities. Returns and statistics available since December 2011.
Bloomberg Global Aggregate Index: A flagship measure of global investment grade debt from twenty-four local currency markets. Includes treasury, government-related, corporate, and securitized fixed-rate bonds from both developed and emerging markets issuers. Launched January 1, 1990.
Bloomberg Barclays U.S. Corporate High Yield 2% Issuer Capped Index: Measures the performance of high yield corporate bonds issued by US corporations, with a maximum allocation of 2% to any one issuer.
ICE BofA Euro High Yield Index: Tracks the performance of EUR denominated below investment grade corporate debt publicly issued in the euro domestic or Eurobond markets.
ICE BofA Euro Corporate Index: Tracks the performance of EUR denominated investment grade corporate debt publicly issued in the Eurobond or Euro member domestic markets.
ICE BofA US High Yield Index: Provides a comprehensive, accurate representation of the US high yield market and its components.
Important Notes
This material must be preceded or accompanied by a current prospectus. Investors should read it carefully before investing or sending money.
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.
The Fund may invest in derivatives, which are often more volatile than other investments and may magnify the Fund's gains or losses.
The Fund is subject to the legal, regulatory, political and economic instability associated with investing in Asia-Pacific countries including China and Japan which may cause a decline in value. Emerging markets involve heightened risk related to the same factors as well as increased volatility and lower trading volume.
The Fund can invest in bonds generally and high yield bonds specifically. High yield bonds involve greater risks of default or downgrade and are more volatile than investment grade securities. The Fund is subject to interest rate risk and liquidity risk.
The Fund is subject to sovereign and quasi-sovereign debt risk. KHYB 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. Shares may trade at a premium or discount to their NAV in the secondary market.
The KraneShares ETFs, KFA Funds ETFs, and KraneShares Mutual Funds 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.
