ACE US Dollar SOFR Rate ETF Surpasses 200 Billion KRW in Net Assets

Korea Investment Management announced on May 9 that the net asset value (NAV) of the ACE US Dollar SOFR Rate (Synthetic) Exchange Traded Fund (ETF) has surpassed 200 billion KRW.

The ACE US Dollar SOFR Rate (Synthetic) ETF is a product that tracks the daily performance of the US risk-free reference rate (SOFR). The SOFR rate is recognized as a risk-free rate, as it is the interest rate applied to overnight repurchase agreement (RP) transactions backed by US Treasury securities. It serves as a benchmark rate for products related to floating interest rates.

According to the Korea Exchange, as of May 8, the NAV of the ACE US Dollar SOFR Rate (Synthetic) ETF was recorded at 212.7 billion KRW. Among 35 parking-type ETFs listed in Korea, this ETF has shown outstanding performance, leading to an increase in its NAV. The fund's one-year return stands at 7.41%, exceeding the average return of domestic parking-type ETFs (4.35%). Its six-month return is also higher at 2.82%, compared to the average of 1.97%.

The ACE US Dollar SOFR Rate (Synthetic) ETF was listed on the KOSPI market in April 2023. Its underlying index is the 'Solactive SOFR Daily Total Return Index.' This index reinvests the SOFR rate announced each business day, and is calculated on a compound interest basis. According to the Export-Import Bank of Korea, as of the previous day, the SOFR rate was 4.30%. This means that a risk-free rate exceeding 4% per annum is compounded daily.

The product is also attractive because it allows for easy investment in US dollar assets. Unlike other short-term dollar financial products such as dollar futures ETFs or dollar insurance, the ACE US Dollar SOFR Rate (Synthetic) ETF can be traded with a minimum investment amount and without any investment period restrictions. There are no penalties for early withdrawal, making it a suitable currency-tech product for managing short-term funds during periods of heightened stock market volatility.

Low fees and high liquidity are also advantages. The ACE US Dollar SOFR Rate (Synthetic) ETF has an annual total expense ratio of 0.05%, the lowest among SOFR ETFs listed in Korea, and both subscription and redemption can be completed within two business days (T+1).

Nam Yongsoo, Head of ETF Management at Korea Investment Management, emphasized, "Since the SOFR rate is calculated in New York, the price movement of the underlying index itself is not significant for each product. This is why transaction convenience and cost are key considerations when selecting a product."

He added, "The ACE US Dollar SOFR Rate (Synthetic) ETF is an attractive product that allows investors to freely manage cash holdings without a fixed term and to earn compound interest on a daily basis. It is also suitable for inclusion in a portfolio to diversify risk."

The ACE US Dollar SOFR Rate (Synthetic) ETF is a performance-based product, and past returns do not guarantee future performance. Investors should also be aware that principal loss may occur depending on management results.

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