What this ETF is trying to do

The KRANESHARES CHINA ALPHA INDEX ETF (KCAI) is an exchange-traded fund that focuses on companies in China. Based on its top holdings, the fund includes various businesses such as technology firms like Eoptolink Technology and several large banks, including the Industrial and Commercial Bank of China. Because it holds many different companies, it provides exposure to a wide range of sectors within the Chinese market.

What the numbers show

When looking at KCAI, it is important to understand the difference between "price return" and "total return."

• Price Return only tracks how much the share price itself has changed.

• Total Return includes both the change in share price and any cash distributions (dividends) paid out to investors.

For the past year, the one-year price return was approximately -10.55%. This means the share price went down. However, the one-year total return was approximately 21.43%. This higher number shows that when you include the cash distributions, the overall return was positive.

Year-to-date (YTD), both the price return and the total return are approximately 8.71%.

The current price is $33.14. An estimated price from roughly one year ago was approximately $37.04.

Income and distribution explanation

KCAI has a very high distribution yield of approximately 32.59%. This represents the cash distributions relative to the ETF's price. The fund has paid out approximately $10.80 in trailing distributions.

It is important to remember that a high distribution yield does not mean an investor earned that same percentage as their total return. Also, while these distributions provide cash income, they do not guarantee that your original investment (the principal) will stay the same value.

NAV erosion explanation

"NAV erosion" is a term used to describe when the value of the underlying assets in a fund decreases. While a falling market price does not always mean NAV is declining, we use an "erosion-risk score" to measure this risk.

KCAI has an erosion score of 75, which is labeled as "mild price erosion." This is a measurement of risk rather than a confirmed fact that the fund's value has collapsed.

Pros

• High Distribution Yield: The fund offers a high percentage of cash distributions.

• Positive Total Return: Despite the share price falling over the last year, the total return was positive due to distributions.

Cons

• Price Volatility: The share price saw a decline of approximately 10.55% over the last year.

• Mild Erosion Risk: The fund has a score indicating mild price erosion.

Beginner takeaway

For new investors, KCAI shows how price and total return can tell very different stories. An investor might see the share price going down, but because of high distributions, the total return could still be positive. Always remember that a very high yield can be misleading; it is important to look at the total return and the erosion-risk score to get a fuller picture of how the fund is performing.