[Asia Economy Reporter Kwon Jaehee] Korea Investment Trust Management announced on the 19th that the net asset value of the ‘ACE Comprehensive Bond (AA- or higher) KIS Active ETF (hereinafter ACE Comprehensive Bond ETF)’ has surpassed 400 billion KRW.
This comes about four months after the net asset value exceeded 100 billion KRW last September (September 16, 2022, 104.8 billion KRW).
According to the fund rating agency FnGuide, the ACE Comprehensive Bond ETF first surpassed a net asset value of 400 billion KRW on the 5th (400.6 billion KRW). Since then, steady inflows into the ACE Comprehensive Bond ETF continued, increasing the net asset value to 413.8 billion KRW on the 11th, and recently (as of the 17th) maintaining the net asset value in the 410 billion KRW range.
The ACE Comprehensive Bond ETF is an active exchange-traded fund (ETF) that uses the ‘KIS Comprehensive Bond AA- or Higher Total Return Index’ as its benchmark and was launched on July 15, 2020. The KIS Comprehensive Bond AA- or Higher Total Return Index is composed of high-quality domestic bonds such as government bonds, treasury bonds, bank bonds, and corporate bonds with an outstanding issuance amount of 50 billion KRW or more and a rating of AA- or higher.
It is analyzed that concerns about an economic recession and the Federal Reserve’s hawkish stance have increased preference for bonds, leading to inflows into this fund holding high-quality bonds.
In particular, the industry’s lowest total expense ratio is evaluated to have enhanced the investment attractiveness of the ACE Comprehensive Bond ETF among bond ETFs. Korea Investment Trust Management reduced the total expense ratio of the ACE Comprehensive Bond ETF from the previous 7 basis points (1bp=0.01%) to 2 basis points in September 2021.
With increased interest in bond ETFs combined with a low total expense ratio, the ACE Comprehensive Bond ETF has achieved high growth. Among ETFs investing in AA- or higher bonds over the recent four months since last September (September 16, 2022 ? January 17, 2023), the only product whose net asset value surged by more than 200% is Korea Investment Trust Management’s ‘ACE Comprehensive Bond ETF (292%, 104.8 billion KRW → 410.8 billion KRW).’
Cho Ikhwan, Senior Manager of FI Management Division 1 at Korea Investment Trust Management, stated, "Concerns about an economic recession and the Fed’s strong hawkish stance continue to create a favorable environment for bond investment," adding, "As long as economic indicators do not deviate significantly from the existing forecast path, this trend is expected to continue this year."
He further commented, "As the end of the base interest rate hikes approaches, the competitiveness of comprehensive bond ETFs investing in relatively long-term bonds has increased, and comprehensive bond ETFs will be a good portfolio for individual investors in terms of asset allocation," and added, "We will continue to strategically respond to changing market conditions to build stable returns over the long term."
Meanwhile, the ‘ACE Comprehensive Bond (AA- or higher) KIS ETF’ is a performance-distributing product, and past returns do not guarantee future returns; principal loss may occur depending on management results.
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