Kiwoom Asset Management Launches Korea's First US Maturity Bond ETF

Amid the rising appeal of interest income from U.S. bonds due to the high interest rate trend in the United States, Kiwoom Asset Management has introduced the first maturity-matching exchange-traded fund (ETF) investing in U.S. bonds in the domestic market. On the 16th, Kiwoom Asset Management announced, "We will list the 'Heroes 25-09 U.S. Bonds (AA- and above) Active,' which is expected to realize a yield to maturity (YTM) of around 5% per annum if held until its maturity at the end of September 2025, on the Korea Exchange on the 17th."

This is the first maturity-matching ETF investing in U.S. bonds to be introduced in the domestic market. The product focuses on the higher interest income appeal of U.S. bonds compared to domestic bonds. Currently, the U.S. benchmark interest rate is 5.25?5.50%, which is up to 2.0 percentage points higher than the Korean benchmark interest rate. This product invests in U.S. Treasury bonds, public bonds, corporate bonds, and dollar-denominated bonds maturing around the maturity date. It only includes high-quality issues with an international credit rating of AA- or higher and a market capitalization of over 300 million dollars. Bonds rated AA- or higher generally correspond to AA+ or higher in domestic credit rating standards, classifying them as high-grade bonds.

The expected YTM when held to maturity was 5.35% as of the end of last September according to the expected portfolio. Even if interest rates rise (bond prices fall) after purchase, holding until maturity allows investors to expect the yield anticipated at the time of investment. Additional purchases can be made at the higher YTM. Conversely, if interest rates fall (bond prices rise), investors can sell before maturity to realize capital gains. However, YTM is not a guaranteed yield and may vary depending on the investment timing. YTM can be checked daily on the asset management company's ETF website after the product is listed. Also, as a currency-exposed product without currency hedging, fluctuations in the value of the U.S. dollar are reflected in the ETF’s performance. An increase in the KRW/USD exchange rate (dollar strength) has a positive effect, while a decrease (dollar weakness) has a negative effect.

This ETF is also noteworthy as a pension investment product. As a bond ETF classified as a safe asset, it can be invested up to 100% in both retirement pension and individual pension accounts. When investing through pension accounts, investors can manage pension funds with peace of mind while pursuing predictable and stable returns and also benefit from tax advantages. Jung Sung-in, head of ETF Marketing at Kiwoom Asset Management, said, "The appeal of U.S. bonds, which can provide relatively high interest income while being safe, is significant. It is an alternative that investors seeking stable returns in a market with increased volatility should pay attention to."

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