Samsung KODEX US S&P500 Buffer March Active, Holding Up Well in Sharp Decline

Buffer-type exchange-traded funds (ETFs) are proving to be effective buffers.

Samsung Asset Management announced on the 10th that the KODEX US S&P500 Buffer March Active, launched on the 25th of last month, demonstrated a buffering effect against downside risk compared to the existing KODEX US S&P500 ETF during the market downturn.

Since the announcement of the US reciprocal tariff imposition executive order, market uncertainty has increased, and since the listing of the KODEX US S&P500 Buffer March Active product, the US S&P500 index has fallen by approximately 13.6% as of the previous day. The returns of related ETFs tracking the US S&P500 index also declined. While the KODEX US S&P500, which tracks the US S&P500 index with currency exposure, recorded a -12.7% return, the KODEX US S&P500 Buffer March Active recorded -8.7%, proving its buffering effect against downside risk.

The ETF invests in the US S&P500 index and uses options to buffer losses up to about 10% during downturns, while targeting returns of approximately 16.4% during upturns. It was listed on March 25 and is Asia's first buffer-type ETF.

The KODEX US S&P500 Buffer March Active is based on an S&P500 index level of 5650, with the buffer lower bound at 5075, representing a -10.2% level, and the cap level, indicating the upper return limit, at 6575, which corresponds to 16.4%. If the S&P500 remains between 5650 and 5075 by the end of March next year, the ETF aims to provide a 0% return based on the listing date. If it is between 5650 and 6575, it aims to provide the increase relative to 5650 up to a maximum of 16.4%. If the S&P500 falls below 5075, losses beyond the 10.2% buffer apply, and if it rises above 6575, the return is capped at approximately 16.4%.

Although the return structure targeted by the buffer-type ETF is set on a one-year basis, due to the nature of ETFs being traded like stocks, they can be bought and sold at any time. Since the option maturity is one year, the option's value varies over time, so investors should be aware that the return structure may differ depending on the timing of their trades.

Samsung Asset Management provides daily updates on important indicators such as the cumulative return trend of the buffer-type ETF, the remaining ETF cap achievable if held until maturity, and the remaining ETF buffer on the KODEX website.

Kim Sun-hwa, head of the ETF Management Team 2 at Samsung Asset Management, said, "As uncertainty in domestic and international politics and economics rises due to issues such as the US reciprocal tariff imposition, asset volatility increases, and demand for defensive ETFs that can reduce loss risk is expected to grow."

She added, "The buffer-type ETF is actually showing a buffering effect against return declines compared to other ETFs tracking the US S&P500 index. As the maturity date approaches, the targeted return structure becomes more apparent, highlighting the downside buffering effect, making it a suitable product for conservative investors seeking to hedge against downside risk."

Buffer-type ETFs, which first appeared in the US market in 2016, have grown to include about 370 products from 14 asset managers with net assets of 93 trillion KRW as of the end of March.

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