KCGI Management Launches 'KCGI Ultra-Long-Term Bond Fund' for Long-Term Government and Public Bonds Investment

KCGI Asset Management announced on the 16th the launch of the 'KCGI Ultra-Long-Term Bond Securities Investment Trust,' which can generate additional returns during periods of declining interest rates through long-term investment in government and public bonds.

This fund primarily invests in long-term government bonds and public bonds with maturities of 10 years or more. Holding these bonds allows for stable interest income, and when interest rate cuts become more pronounced, it is structured to capture additional capital gains.

Additionally, the fund pursues excess returns by employing a repo sale strategy, borrowing funds using up to 50% of the bond assets held as collateral to make additional investments in high-quality bonds.

Since bonds with longer remaining maturities experience greater volatility in yield due to interest rate fluctuations, investing in long-term bonds can yield higher returns when interest rates decline, as the longer maturity results in greater gains.

Conversely, rising interest rates may cause valuation losses or trading losses. For example, a bond with a 1-year maturity will see its price move approximately 1% when interest rates change by 1%, whereas a bond with a 10-year maturity can see its price move by about 10%.

KCGI Asset Management stated, "Major global countries are competing to lower their benchmark interest rates, and we believe South Korea has also entered an interest rate cut cycle. For ultra-long-term government bond funds, the long maturities of the assets held mean that when market interest rates fall, the scale of trading and valuation gains can be relatively larger compared to bonds with shorter maturities."

The portfolio's target duration (weighted average maturity) is approximately 16 years, and the yield to maturity (YTM) is about 2.69% per annum (as of December 11).

The fund is an open-ended, additional-type fund with various fee structures depending on subscription conditions, classified as a type fund with a risk rating of 4 (moderate risk). Purchases made before 5 p.m. are applied at the base price of 2 business days later, and redemptions made before 5 p.m. are applied at the base price of 3 business days later, with payment made on the third business day. The total fee for the Ce class is 0.38%.

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