Samsung Asset Management Leading 'KOFR' Market... KODEX Interest Rate Active ETF Listed

[Asia Economy Reporter Hwang Yoon-joo] Samsung Asset Management is launching the first Exchange-Traded Fund (ETF) in Korea that tracks the returns of the Korean Risk-Free Rate (KOFR) index. Attention is focused on whether it will absorb demand from Money Market Funds (MMFs), where short-term funds are mainly traded.

Samsung Asset Management announced on the 26th that it will list the 'KODEX KOFR Interest Rate Active (Synthetic) ETF.' This ETF is based on the KOFR index calculated by the Korea Securities Depository.

KOFR is a newly created Korean version of the Risk-Free Rate (RFR) by financial authorities. Simply put, the risk-free rate is the base rate used to determine interest rates for financial products such as loans.

Until now, Korea has used the interest rate of Certificates of Deposit (CDs), which are based on quotes, as the risk-free rate. However, as concerns about the transparency of the quote-based risk-free rate have grown, major advanced countries are developing their own risk-free rates.

KOFR was developed as part of this effort as a risk-free rate, calculating interest rates based on repurchase agreement (RP) transaction data secured by overnight government bonds and Monetary Stabilization Bonds.

Samsung Asset Management expects to attract investment demand from individuals and institutions moving into the short-term money market through this ETF. This is because the deposit fee for funds entrusted to securities firms by individuals is typically very low, around 0.25% to 0.5% (annualized) over three months. The KODEX KOFR Interest Rate Active ETF offers a relatively high interest rate (1.39% as of April 22) even with just one day of investment.

Additionally, changes in the MMF valuation method starting this month are expected to have an impact. The advantage of minimal price fluctuations disappears as the valuation method changes from 'book value evaluation' to 'market value evaluation.' Furthermore, Samsung Asset Management explains that if interest rates are relatively high, institutional funds invested in MMFs may flow into ETFs.

This content was produced with the assistance of AI translation services.