Net Assets Reach 235 Billion KRW Just Over 40 Days After Listing
Dollar-Holding Institutions Set 200 Billion KRW in Dollars
On-Exchange Won Purchases Including Individuals Exceed 17 Billion KRW
Samsung Asset Management announced on the 16th that the KODEX SOFR Interest Rate Active ETF, which was the first of its kind to be listed domestically on the 4th of last month, surpassed 200 billion KRW in net assets in just over 40 days since its listing.
The unique advantage of being able to invest directly in the U.S. risk-free benchmark interest rate (SOFR) using held dollars is analyzed to have precisely met the needs of institutional investors.
Moreover, with the U.S. raising its benchmark interest rate earlier this month, the SOFR interest rate exceeded 5% annually, making it about 1.5 percentage points higher than the domestic KOFR interest rate of 3.5% per year. As a result, the number of institutional investors choosing the KODEX U.S. Dollar SOFR Interest Rate Active ETF as an investment destination to manage dollar funds at high interest rates has increased. The SOFR rate as of May 12, announced by the New York Federal Reserve (FED), reached 5.05% annually.
The KODEX U.S. Dollar SOFR Interest Rate Active ETF is a product that tracks the yield of the U.S. SOFR index. SOFR (Secured Overnight Financing Rate) is the U.S. risk-free benchmark interest rate calculated daily based on one-day repurchase agreement (RP) transaction data secured by U.S. Treasury securities. Due to the index’s characteristic of compounding ultra-short-term interest rates with a duration of one business day, it continued to generate profits without capital loss and showed an upward trend even last year when the U.S. benchmark interest rate rose sharply.
In particular, this ETF is the first domestic ETF that institutional investors can subscribe and redeem in U.S. dollars. For institutional investors, subscribing and redeeming with held dollars eliminates the need for currency exchange, thus avoiding exchange fees, and both principal and profits can be received in dollars on T+2 days, ensuring excellent liquidity. In terms of returns, it serves as a better alternative to dollar deposits and dollar RPs, and as a substitute for dollar short-term bond products in terms of duration risk hedging, making the SOFR ETF an effective tool for managing foreign currency liquidity.
In fact, the SOFR reference price in dollars provided on the Samsung Asset Management KODEX website has not fallen on any day in the past month. In other words, investing directly in dollars not only frees investors from exchange rate fluctuations but also allows them to earn approximately 5% annual returns with almost no risk of loss due to the one-day duration product characteristic.
On-exchange KRW purchases, including those by individual investors, have also exceeded approximately 17 billion KRW. The KODEX U.S. Dollar SOFR Interest Rate Active ETF invests in the global representative key currency, the U.S. dollar, while accumulating SOFR interest rates at a level of 4.55~5% annually every day, enabling active utilization of the U.S. high-interest-rate environment.
Investors can expect returns at the SOFR interest rate level without restrictions on investment amount or period. Unlike deposits, there are no additional fees for early withdrawal, and investors can receive one day’s SOFR interest rate even if held for just one day. Additionally, this ETF is the only ETF that allows investment in U.S. dollars within pension plans. Up to 70% investment is allowed in retirement pension DC/IRP accounts, and 100% investment is possible in pension savings accounts. Long-term investment through pensions allows investors to enjoy tax benefits while preparing for potential dollar expenditures after retirement.
Im Taehyuk, Head of ETF Management at Samsung Asset Management, stated, “The KODEX U.S. Dollar SOFR Interest Rate Active ETF is the first domestic ETF that can be subscribed and redeemed in U.S. dollars, attracting significant interest from financial institutions sensitive to interest rates and companies actively managing their funds.” He added, “Following last year’s launch of the first domestic KOFR Interest Rate Active ETF, Samsung Asset Management continues to introduce risk-free benchmark interest rate products such as the SOFR Interest Rate Active ETF, striving to provide investors with innovative short-term fund management solutions.”
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