Kiwoom Asset Management: "A One-Stop Retirement Solution for Automatic Growth, Dividends, and Tax Efficiency"

Introducing an ETF That Automatically Switches from Growth to Dividend Stocks in 2040
Automatic Transition from S&P500 and S&P500 TOP10 to SCHD... Target Retirement Year Set for 2040

Kiwoom Asset Management announced on November 10 that it will simultaneously list the 'KIWOOM US S&P500 & Dividend Dow Jones Weight Conversion ETF' and the 'KIWOOM US S&P500 TOP10 & Dividend Dow Weight Conversion ETF' on the Korea Exchange on November 11.

This marks Korea’s first equity lifecycle ETF series that applies a 'lifecycle dividend conversion strategy,' which automatically shifts from growth assets to dividend assets according to the investor’s lifecycle. The only difference between the products is the composition of their growth assets.

The KIWOOM US S&P500 & Dividend Dow Jones Weight Conversion ETF includes the S&P500, the leading growth index in the US, as its growth asset. The KIWOOM US S&P500 TOP10 & Dividend Dow Weight Conversion ETF holds the S&P500 TOP10, which comprises the top 10 US stocks by market capitalization regardless of industry, as its growth asset. For both products, the dividend asset is the 'Dow Jones U.S. Dividend 100 Index,' which represents leading US dividend growth stocks. Additionally, these are monthly dividend ETFs that pay distributions at the end of each month.

This addresses the limitations of traditional lifecycle products such as Target Date Funds (TDFs), which only shift from equities to bonds at retirement and lack a dividend function during the withdrawal phase, making it difficult to secure a stable cash flow.

The KIWOOM US S&P500 & Dividend Dow Jones Weight Conversion ETF and the KIWOOM US S&P500 TOP10 & Dividend Dow Weight Conversion ETF secure monthly distributions through an automatic structure that shifts from growth stocks to dividend stocks. A key feature is that investors can prepare for retirement from the accumulation phase through the withdrawal phase with a single ETF.

Lee Kyungjun, Head of ETF Management at Kiwoom Asset Management, is explaining the 'KIWOOM Lifecycle Dividend Conversion ETF Series.' Kiwoom Asset Management.

The ETF series is designed with 2040 as the target retirement year. During the pre-retirement accumulation phase, 75% is invested in growth assets (S&P500 or S&P500 TOP10) and 25% in dividend assets (Dow Jones U.S. Dividend 100).

From 2038 to 2039, over a 24-month period, the allocation to growth assets is reduced by 2.08% each month, and the allocation to dividend assets is automatically increased. After 2040, the portfolio shifts to 25% growth assets and 75% dividend assets.

Because the conversion occurs internally within the ETF, investors are not subject to capital gains taxes generated during this process. Therefore, investors can convert the performance (pre-tax returns and principal) of growth assets accumulated up to 2040 into dividend assets without any separate transactions. This maximizes both cash flow for the withdrawal phase and the benefits of reinvestment.

Even after 2040, maintaining a 25% allocation to growth assets allows investors to pursue both growth and dividend returns during market upswings. At the end of each month, the portfolio is rebalanced to maintain the 25% growth and 75% dividend allocation. Through this process, the returns from growth stocks are used to continuously purchase additional dividend stocks, creating a 'structural dividend growth' effect. This enables investors to maintain a stable and sustainable cash flow throughout an extended retirement period.

The KIWOOM Lifecycle Dividend Conversion ETF Series is a passive ETF that tracks an index jointly developed by S&P Dow Jones Indices, the world’s largest index provider, and Kiwoom Asset Management. It is the world’s first example of combining the S&P500 Index, the most representative stock index, with the Dow Jones U.S. Dividend 100 Index.

By purchasing a single ETF, investors can address growth, dividends, and tax efficiency, making this the starting point for a comprehensive retirement ETF lineup. The series is expected to expand in the future to include 2050 and 2060 target year products.

Lee Kyungjun, Head of ETF Management at Kiwoom Asset Management, explained, "If you ignore the withdrawal issue and simply continue long-term investing, you may face a tax bomb when it comes time to withdraw your assets." He added, "The lifecycle dividend conversion ETF is the most convenient retirement preparation tool, as it minimizes transition risks such as taxes during the retirement transition, maximizes returns during the accumulation phase, and ensures stable cash flow during the withdrawal phase."