Kiwoom Asset Management announced on July 21 that the 'KIWOOM US Tech 100 Monthly Target Hedge Active ETF' will be listed on July 22.
This product is the world's first ETF to apply a Protective Put replication strategy to an ETF investing in the US Tech 100 Index. It is designed to meet the needs of investors who wish to focus on leading US technology stocks while seeking to avoid losses and pursue gains.
Additionally, this is a monthly dividend ETF that utilizes both dividend income from US technology stocks and interest income from US short-term bonds to pay out distributions at the end of each month.
The Protective Put strategy is structured to minimize downside risk while allowing participation in upside opportunities. It is the exact opposite of the covered call strategy, which is limited in upside and vulnerable to downside. This option investment strategy involves buying stocks and purchasing put options that become profitable if the stock price falls below a certain strike price.
This product operates by replicating a one-month virtual option with a strike price set at the closing price at the end of the previous month. On the first day of each month, the previous month's closing price (based on the US market) is set as a 'monthly target defense line,' which serves as a kind of profit preservation target. The asset allocation is adjusted daily throughout the month to minimize the probability that the return will fall below this defense line. In a rising market, the equity allocation can be increased up to 95%. The monthly target defense line is reset each month, providing monthly protection effects.
This strategy features the use of a 'delta hedge' technique, which replicates the effect of options by adjusting the allocation between stocks and bonds without directly purchasing options. As a result, unnecessary option costs can be reduced in rising or sideways markets, effectively addressing the cost burden that was a drawback of traditional Protective Put strategies.
Applying this technique to an ETF structure is a world first, and another strength is that it is composed only of intuitive assets?stocks and bonds?thus enhancing investor understanding and accessibility. The equity portion utilizes a Nasdaq 100 tracking ETF listed in the US, while the bond portion uses a US short-term Treasury ETF, a safe asset. When adjusting asset allocation, Nasdaq 100 index futures are also partially used.
This structure is designed as an 'automatic risk management' system, which automatically reduces the allocation to risky assets in the event of an unexpected market plunge and increases the equity allocation again when stock prices recover, thereby seeking returns. It is expected that this will help reduce both psychological anxiety and loss risk for investors even in crisis situations.
Furthermore, through an active hedging strategy, the structure significantly lowers volatility. Over the long term, it maintains low volatility comparable to 15-year US Treasury bonds, while delivering a long-term performance pattern similar to the S&P 500 Index.
Lee Kyungjun, Head of ETF Management, stated, "This KIWOOM US Tech 100 Monthly Target Hedge Active ETF is an innovative, strategy-based product focused on balancing the two factors that investors value most: 'loss avoidance' and 'participation in gains.' Now, individual investors can easily utilize risk management strategies typically used by institutional investors and hedge funds to pursue stable investments in uncertain markets."
He added, "Since actual options are not used, it is also eligible for investment in retirement accounts. This is a medium-risk, medium-return product for risk-averse investors, utilizing an option theory-based strategy that mechanically executes diversified buying and selling."
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