Value context and insight. lkm@koreatimes.co.kr
Mirae Asset rolls out S&P500 tracker with monthly dividends
Mirae Asset Global Investments official holds a placard to promote a new product. Courtesy of Mirae Asset Global Investments
By Lee Kyung-min
Mirae Asset Global Investments has rolled out an updated covered call exchange-traded fund (ETF) that tracks the advanced S&P 500 index and pays monthly dividends, the financial service provider said Tuesday.
Covered call refers to buying securities while simultaneously selling off call options to generate profits. Investors profit when stock prices rise. When the market tumbles, the loss is offset by selling call options – the right to buy stocks at a certain price.
The TIGER US S&P500+10% PREMIUM DAILY OPTION was listed on the Korea Exchange (KRX) May 21 and has since been growing in popularity.
The financial derivative of 20 billion won ($14 million) sold out on the first day of listing. Mirae Asset was able to generate sales of an additional 8 billion won.
This is the top-selling record for KRX-listed ETFs that pay a monthly dividend.
According to market sources, listed ETFs with covered call options surpassed 2 trillion won in total assets in Korea.
The derivative seeks to net an annual dividend of over 10 percent, as indicated by the name “+10% Premium.”
The 10 percent will be achieved with the tailored strategy whereby only a limited target proportion of call options will be sold, unlike the previous market norm that sold the entire option. This was a global first, an investment strategy developed by Mirae Asset.
The investment management fee, or total expense ratio, is limited to 0.25 percent, lower than existing covered call ETFs.
Many investors can reorient the monthly dividends to generate greater income for post-retirement planning.
“The product is a perfect fit for investors seeking to profit from the S&P500 index boom, while receiving monthly dividends at the same time,” a Mirae Asset official said.
“The EFT will accrue handsome returns, helping investors bolster their spending power.”