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)
Introduction to KraneShares
About KraneShares
Krane Funds Advisors, LLC is a specialist investment manager focused on China, Carbon, Climate, and other uncorrelated assets. KraneShares seeks to provide innovative, high conviction, and first to market strategies. The firm was founded in 2013 and manages for institutions and individuals globally. The firm is a signatory of the United Nations-supported Principles for Responsible Investment (UN PRI).
Product Suite
China Thematic Equity
- KWEB - Internet & E-Commerce*
- KURE - Healthcare
- KGRN - Clean Technology
- KSTR - STAR Market*
- KTEC - Hang Seng Tech
China Core Equity
- KBA - MSCI China A 50
- KCAI - China Onshore Alpha Index
Options Income
- KLIP - China Internet & Covered Call
- KWIN - Wahed Short-Term Alternative Income
Managed Futures
- KMLM - Mount Lucas Managed Futures
Global Equity
- KARS - Electric Vehicles & Future Mobility*
- AGIX - Artificial Intelligence & Technology
- KOID - Humanoid & Embodied Intelligence*
EM Equity
- KEMX - MSCI Emerging Markets ex China
- KEMQ - Emerging Markets Consumer Tech
- KPHO - Dragon Capital Vietnam Growth
Levered
- KBAB - 2X Long BABA Daily
- KPDD - 2X Long PDD Daily
- KMLI - 2X Long MELI Daily
- KJD - 2X Long JD Daily
- KBDU - 2X Long BIDU Daily
Carbon
- KRBN - Global Carbon Strategy*
- KEUA - European Carbon Allowance
- KCCA - California Carbon Allowance
Fixed Income
- IVOL - Quadratic Interest Rate Volatility & Inflation Hedge
- BNDD - Quadratic Deflation ETF
- KHYB - Asia High Income USD Bond
- KCSH - Sustainable Ultra Short Duration
US Equity
- KSPY - Hedgeye Hedged Equity
- BUYO - Man Buyout Beta Index
- KVLE - Value Line® Dynamic Dividend Equity
*Strategy also available in UCITS
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 $893 billion in December of 2025, an increase of 247%.
- 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 8.2% compared to 6.5% 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.
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.
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
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) showing growth from 2005 to 2025, with breakdown between Investment Grade (87%) and Non-Investment Grade (13%)]
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 chart showing regional distribution with North America and Europe dominating, while Asia regions collectively represent about 14% despite accounting for ~30% of Global GDP]
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) chart showing ratios from 2014 to 2024, with values ranging from 4.0 to 6.1]
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 chart showing a significant decline from peaks of around $120 billion in 2019 to under $10 billion in 2024-2025]
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
Data from Bloomberg as of 12/31/2025. Real Yield = Yield to Maturity – CPI Inflation. CPI inflation sourced from the World Bank as of 12/31/2024. Please see the end of the presentation for definitions. Past performance does not guarantee future results.
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
Data from JP Morgan as of 12/31/2025. Asia Credit IG is represented by the securities in the JP Morgan Asia Credit Index (JACI) Investment Grade. Asia Credit HY is represented by the securities in the JP Morgan Asia Credit Index (JACI) Corporates Non-Investment Grade. US Corp IG is represented by the securities in the JP Morgan US Liquid Index. US Corp HY is represented by the securities in the JP Morgan U.S. Liquid High Yield Index. Euro Corp HY is represented by the securities in the JP Morgan Euro High Yield Index. Euro Corp IG is represented by the JP Morgan Aggregate Index Euro- Corporate. Please see the end of the presentation for definitions.
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
High Yield Duration
Data from Amova and Bloomberg as of 12/31/2025. 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
Data from JP Morgan as of 12/31/2025. SD = Standard Deviation.
Please see the end of the presentation for definitions. Past performance does not guarantee future results.
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 Rates² 2011 to 2025 Estimate
Default rates and default rate forecasts are from JP Morgan as of 12/31/2025. Please see the end of the presentation for definitions.
EM = Emerging Markets ME = Middle East HY = High Yield
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 | 114 billion |
KHYB Characteristics
| Metric | Value |
|---|---|
| Weighted Average Duration (Years) | 2.25 |
| 30-Day SEC Yield (%) | 6.23% |
| 12-Month Distribution Rate (%) | 7.50% |
| Weighted Average Yield-to-maturity (%) | 8.55% |
| Number of Bonds | 70 |
Data from Amova Asset Management, KraneShares, JP Morgan, and Bloomberg as of 12/31/2025. Please see the end of the presentation for definitions.
The 12-Month Distribution Rate includes return of capital. For more information on the sources of the Fund's latest distribution, please refer to the Fund's 19a Notice.
BPS = basis points
The performance data quoted represents past performance, and current returns may be higher or lower. Past performance does not guarantee future results. For additional fund performance and information, please see slide 18.
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
- India 25.41%
- Mainland China 13.77%
- Macau 10.17%
- Hong Kong 10.09%
- Thailand 7.48%
- Indonesia 5.69%
- United Kingdom 4.54%
- Mongolia 3.89%
- Philippines 3.65%
- Japan 3.55%
- Singapore 1.98%
- Others 6.66%
- Cash 3.12%
KHYB Sector Breakdown
- Financial 33.33%
- Real Estate 22.15%
- Diversified 8.08%
- Metals & Mining 7.92%
- Utilities 7.60%
- Industrial 6.00%
- Sovereign 4.65%
- Oil & Gas 3.45%
- Consumer 1.28%
- Infrastructure 1.23%
- TMT 1.20%
- Cash 3.12%
Data from KraneShares, Amova, and Bloomberg as of 12/31/2025. TMT = Technology, Media, & Communications.
Conclusion
-
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%.¹
-
Despite Asia ex-Japan representing nearly one-third of global GDP, the region makes up only 15% of the Bloomberg Barclays Global Aggregate Index.²
-
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.
¹. Data from JP Morgan as of 12/31/2025. ². Data from Bloomberg as of 12/31/2025.
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 12/31/2025
| Metric | 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 | 71 |
Top 10 Holdings as of 12/31/2025 Holdings are subject to change.
| Holding | % |
|---|---|
| WYNN MACAU LTD 5 5/8 08/26/28 | 2.62 |
| MANAPPURAM FINANCE LTD MTN 7 3/8 05/12/28 | 2.38 |
| MUTHOOT FINANCE LTD 6 3/8 04/23/29 | 2.37 |
| MUTHOOT FINANCE LTD MTN 6 3/8 04/23/29 | 2.37 |
| STUDIO CITY FINANCE LTD 6 1/2 01/15/28 | 2.33 |
| KRUNG THAI BANK PCL/CAYMAN ISLANDS 4.4 PERP | 2.32 |
| FORTUNE STAR BVI LTD 5.05 01/27/27 | 2.28 |
| INDIA CLEAN ENERGY HOLDINGS MTN 4 1/2 04/18/27 | 2.27 |
| MEDCO CYPRESS TREE PTE LTD 8 5/8 05/19/30 | 2.21 |
| STANDARD CHARTERED PLC 7 PERP | 2.16 |
KHYB Performance History as of 12/31/2025:
Cumulative %
| 3 Mo | 6 Mo | Since Inception | |
|---|---|---|---|
| Fund NAV | 1.54% | 6.09% | 13.49% |
| Closing Price | 1.55% | 5.96% | 13.35% |
| JACI Non-Investment Grade Corporate Index | 1.33% | 5.74% | 13.15% |
Average Annualized %
| 1 Yr | 3 Yr | 5 Yr | Since Inception | |
|---|---|---|---|---|
| Fund NAV | 9.83% | 7.98% | -0.10% | 1.70% |
| Closing Price | 9.61% | 7.92% | -0.20% | 1.68% |
| JACI Non-Investment Grade Corporate Index | 9.43% | 7.82% | -1.33% | 1.66% |
The performance data quoted represents past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investors shares, when sold or redeemed, may be worth more or less than their original cost and current performance may be lower or higher than the performance quoted. For performance data current to the most recent month end, please visit www.kraneshares.com/khyb.
Index returns are for illustrative purposes only. Index performance returns do not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index.
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. It is calculated by taking price changes for each item in the predetermined basket of goods and averaging them.
Interest Coverage Ratio: A debt and profitability ratio used to determine how easily a company can pay interest on its outstanding debt. The interest coverage ratio may be calculated by dividing a company's earnings before interest, taxes, depreciation, and amortization (EBITDA) by its interest expense during a given period.
Real Yield: The return one can expect to receive on a bond investment accounting for inflation. This is calculated by subtracting the inflation rate from the nominal yield on a bond.
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: The standard deviation is a measure of the amount of dispersion of variation or dispersion of a set of values. A low standard deviation indicates that the values tend to be close to the mean of the set, while a higher standard deviation indicates that the values are spread out over a broader range.
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. It is based on the most recent 30-day period covered by the fund's filings with the SEC.
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. The 12-Month Distribution Rate is calculated by summing any income, capital gains and return of capital distributions over the past twelve months and dividing by the sum of the most recent NAV and any capital gain distributions made over the same period.
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: The J.P. Morgan Asia Credit Index 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 J.P. Morgan Asia Credit Index Core (JACI Core) consists of liquid US-dollar denominated debt instruments issued out of Asia ex Japan. The JACI Core is based on the composition and established methodology of the J.P. Morgan Asia Credit Index (JACI), which is market capitalization weighted. JACI Core includes the most liquid bonds from the JACI by requiring a minimum $350 million in notional outstanding and a minimum remaining maturity of 2 years. JACI Core also implements a country diversification methodology. Historical returns and statistics for the JACI Core are available from December 30, 2005. The non-investment grade version of 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 Investment Grade: The J.P. Morgan Asia Credit Index Core (JACI Core) consists of liquid US-dollar denominated debt instruments issued out of Asia ex-Japan. The JACI Core is based on the composition and established methodology of the J.P. Morgan Asia Credit Index (JACI), which is market capitalization weighted. JACI Core includes the most liquid bonds from the JACI by requiring a minimum $350 million in notional outstanding and a minimum remaining maturity of 2 years. JACI Core also implements a country diversification methodology. Historical returns and statistics for the JACI Core are available from December 30, 2005. The investment grade version of the index 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: The 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: The JP Morgan US Liquid Index provides a comprehensive, accurate representation of the investment grade market and its components. Corporate bonds rated Baa3/BBB- or higher by Moody's and Standard & Poor's, respectively, with issue sizes of at least $300 million will qualify for inclusion in the index. A further requirement is that each bond be issued by a corporate entity that has at least $1 billion of fixed rate bonds outstanding to ensure overall "issuer" liquidity.
JP Morgan USD Emerging Markets High Yield Bond Index: The 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. The index tracks instruments that are classified as non-investment grade (HY) in the established JP Morgan EMBI Global Diversified Core and JP Morgan CEMBI Broad Diversified Core indices, and combines them with a market capitalization based weighting. The returns and statistics are available since December 2011.
Bloomberg Global Aggregate Index: The Bloomberg Barclays Global Aggregate Index is a flagship measure of global investment grade debt from twenty-four local currency markets. This multi-currency benchmark includes treasury, government-related, corporate, and securitized fixed-rate bonds from both developed and emerging markets issuers. The index was launched on January 1, 1990.
Bloomberg Barclays U.S. Corporate High Yield 2% Issuer Capped Index: The 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: The 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: The 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: The 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. 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 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 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. Japan has also experienced natural disasters of varying degrees of severity, which could negatively affect the Fund. Emerging markets involve heightened risk related to the same factors as well as increase volatility and lower trading volume. Fluctuations in currency of foreign countries may have an adverse effect to domestic currency values. 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, which is the chance that bonds will decline in value as interest rates rise. 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.
The Fund is subject to sovereign and quasi-sovereign debt risk. The governmental authority that controls the repayment of sovereign and quasi-sovereign debt may be unwilling or unable to repay the principal and/or interest when due. 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. 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, 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.
