KODEX US Money Market Active ETF Delivers Strong Returns

As uncertainty in the global economy grows, there is a clear trend of increased preference for the US dollar, a safe-haven asset. 'Dollar parking' ETFs, which allow investors to seek both interest income and foreign exchange gains by investing in high-yield dollar assets, are emerging as essential safe havens for investors.

On December 11, Samsung Asset Management announced that its 'KODEX US Money Market Active' ETF, which was listed in May, achieved a six-month return of 10.5%.

KODEX US Money Market Active is a US money market ETF that invests simultaneously in safe assets such as ultra-short-term US bonds and the US dollar. As market volatility has increased significantly, investors can use this ETF as a short-term dollar-based cash investment while minimizing risk.

Investors can invest directly in the US money market without the need to convert Korean won to US dollars. The price per ETF share is set at around 10 dollars, making it easier for customers to intuitively track returns and enhancing investment convenience. Even though the US Federal Reserve cut its benchmark interest rate by 0.25 percentage points to an annual rate of 3.50-3.75%, this remains higher than Korea’s benchmark rate of 2.50% per annum.

Unlike products that invest only in US Treasury bonds, this ETF strategically diversifies investments not only in US Treasuries but also in a variety of short-term financial instruments, including high-quality financial bonds and corporate bonds rated from AAA to A. By securing a higher additional credit spread compared to Treasuries, it generates 'plus alpha' returns.

Given the nature of parking-type products, cost savings are directly linked to returns, so products with lower fees are advantageous. This ETF has a total expense ratio of 0.05% per annum, which is lower than that of comparable dollar short-term fund ETFs, allowing for the maximization of compound returns over the long term.

Samsung Asset Management has proposed three ways to utilize KODEX US Money Market Active, tailored to different investment preferences, going beyond simple holding.

For conservative investors, there is the 'Korean won-US dollar balanced allocation' strategy. This involves holding domestic Korean won money market ETFs and KODEX US Money Market Active in a 5:5 or 6:4 ratio. Through this, investors can naturally hedge against won-dollar exchange rate volatility while securing stable interest income.

For aggressive investors, a 'forex timing' strategy is suggested. Normally, investors diversify, but during periods of dollar strength (rising exchange rates), they increase their allocation to US money market assets to maximize foreign exchange gains. Conversely, during periods of won strength (falling exchange rates), they shift funds to domestic money market products to protect against foreign exchange losses. By utilizing the real-time trading feature of ETFs, investors can respond swiftly to market changes.

For investors such as retirees who prioritize cash flow, a 'monthly dividend maximization' strategy is also possible. In this approach, 40% of the portfolio is allocated to KODEX US Money Market Active to secure the stability of dollar assets, while the remaining 60% is combined with high-dividend covered call ETFs. This allows for the establishment of a stable monthly dividend system in both Korean won and US dollars, enhancing both the stability and profitability of the portfolio.

Shin Hyunjin, manager at Samsung Asset Management, stated, "Although the dollar exchange rate is currently at a high level, KODEX US Money Market Active is offering a high yield-to-maturity (YTM) of 4.22% per annum." He added, "Even if the exchange rate remains flat, investors can expect stable and attractive returns, and during periods of dollar strength and high exchange rates, there are additional opportunities for gains through foreign exchange appreciation."

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