Samsung Asset Management Launches KODEX US 30-Year Treasury Active ETF

Samsung Asset Management announced that it will newly list the U.S. long-term bond ETF, ‘KODEX US 30-Year Treasury Active (H) Exchange-Traded Fund (ETF),’ on the 18th.

KODEX US 30-Year Treasury Active (H) is the first product launched as a very simple re-investment structure that holds up to 30% of U.S. 30-year Treasury bonds directly, with the remainder invested in a purely U.S. 30-year Treasury ETF listed in the U.S. This simple structure significantly reduces the actual costs compared to similar products. The total expense ratio is also the lowest at 0.015% among other products investing in U.S. bonds.

Under the current Capital Markets Act, domestic ETFs cannot directly invest more than 30% of their total assets in U.S. bonds. Therefore, ETFs tracking U.S. 30-year Treasury investments have chosen product structures that operate through leveraged ETFs, ETNs, or synthetic swap contracts. However, leveraged ETFs inherently incur higher actual costs due to their derivative structure, and more importantly, their structure of tracking daily fluctuations by 2 to 3 times makes it difficult to accurately track the performance of the underlying assets. Synthetic swap contracts also increase investors’ actual costs because high fees must be paid to counterparties.

Considering these circumstances, KODEX US 30-Year Treasury Active (H) is designed as a re-investment type to minimize actual costs. Although there is a perception that re-investment structures incur higher costs because fees are paid twice compared to direct investment, in the case of overseas bond investments, using a re-investment structure can actually result in lower actual costs than derivative or synthetic operation methods.

In fact, re-investment products can invest more than 40% of total assets in other ETFs, allowing sufficient inclusion of ETFs investing purely in U.S. 30-year Treasuries. The re-investment fee in this case is about 0.03% to 0.15% annually. The re-investment costs when including derivative products or synthetic swap contracts exceed 1% annually. Accordingly, the total expense ratio/cost of this product is estimated to be about 0.05% annually based on the expected portfolio.

KODEX US 30-Year Treasury Active (H) can be 100% invested through DC/IRP and pension savings accounts, making it usable as a pension ETF that offers stable returns and tax benefits. Since it is a product with monthly dividends, investors can receive stable monthly distributions in pension accounts and reinvest them to gain tax benefits. Additionally, investing through a brokerage-type ISA offers a 9.9% low-rate separate taxation benefit.

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