ACE High-Grade Corporate Bond (AA- or Higher) Active ETF Surpasses 100 Billion Won in Net Assets

Korea Investment Management announced on September 22 that the net asset value of the ACE High-Grade Corporate Bond (AA- or higher) Active Exchange-Traded Fund (ETF), which was listed on September 9, has surpassed 100 billion won.

According to the Korea Exchange, as of September 19, the net asset value of the ACE High-Grade Corporate Bond (AA- or higher) Active ETF was recorded at 105.1 billion won. The net asset value doubled in about two weeks since its listing. At the time of listing, the initial trust principal was 50 billion won.

The ACE High-Grade Corporate Bond (AA- or higher) Active ETF is a product that invests in corporate bonds with a credit rating of AA- or higher, as well as short- and mid-term financial debentures. Its benchmark index is the ‘KIS 1-3 Year High-Grade Credit (AA- or higher) Total Return Index,’ calculated and published by KIS Pricing. This index consists of financial debentures and corporate bonds with an outstanding balance of at least 50 billion won, a credit rating of AA- or higher, and a remaining maturity of more than one year but less than or equal to three years.

The inflow of funds is attributed to a proven track record in management. The ACE High-Grade Corporate Bond (AA- or higher) Active ETF is managed by the team responsible for the Korea Investment Credit Focus ESG Fund, which is the largest domestic bond fund (excluding ETFs) in Korea. The FI Management Division 2, which includes Manager Park Bitnara and Senior Manager Hong Dajeong, manages approximately 21 trillion won in domestic bond funds and discretionary accounts. They also manage the Korea Investment Credit Focus ESG Fund, which has more than 4 trillion won in assets under management.

Enhanced stability has also contributed to the product’s investment appeal. Unlike the Korea Investment Credit Focus ESG Fund, which includes corporate bonds rated A- or higher, the ACE High-Grade Corporate Bond (AA- or higher) Active ETF only includes securities rated AA- or higher. This product is suitable for investors seeking to earn higher interest than government bonds while also pursuing capital gains from rising bond prices during periods of declining interest rates. According to NICE Investors Service, the average cumulative default rate for bonds rated AA or higher has been 0.00% from 1998 to the present.

Senior Manager Hong, who manages the ETF, commented, “Most bond ETFs listed in Korea focus on ultra-short-term or ultra-long-term investments. The listing of the ACE High-Grade Corporate Bond (AA- or higher) Active ETF, which invests in high-grade corporate bonds in the short- to mid-term range, seems to have expanded options for investors.” She added, “Given the product’s characteristics of pursuing stable interest income and capital gains, it is also highly suitable for use in retirement pension plans.”

She further stated, “Recently, the U.S. Federal Open Market Committee (FOMC) lowered the Federal Reserve’s benchmark interest rate. As I expect long-term government bond yield volatility to remain high, the relative attractiveness of mid-term corporate bonds should continue.”

The ACE High-Grade Corporate Bond (AA- or higher) Active ETF is a performance-based product, and principal loss may occur depending on investment results. Past default rates of bonds may not be indicative of future performance.