KCGI Asset Management said it launched the 'KCGI ultra-long bond securities investment trust [bonds] (KCGI ultra-long bond fund)' that invests in long-term national bonds and government bonds.
The KCGI ultra-long bond fund mainly invests in long-term national treasury bonds and bonds and debentures with maturities of over 10 years. Holders can earn stable interest revenue, and when interest rate cuts begin in earnest, they can also seek additional revenue.
The KCGI ultra-long bond fund also seeks excess revenue by utilizing a repo sell strategy for up to 50% of the securities asset held. The repo sell strategy creates leverage by investing additional funds, secured against held bonds, into high-quality bonds such as short-term credit bonds, commercial paper, and certificates of deposit.
KCGI Asset Management explained that as the remaining maturity of bonds increases, the yield volatility due to interest rate fluctuations also increases, allowing for potentially higher revenue during periods of falling interest rates. Conversely, losses may occur when interest rates rise. For example, if the interest rate fluctuates by 1% for a bond maturing in one year, its price may move by approximately 1%, but a bond maturing in ten years may see a price fluctuation of around 10%.
KCGI Asset Management noted, 'As major global countries are hastily lowering their key interest rates, we believe South Korea has also entered a cycle of lowering the key interest rate.' They added, 'The longer maturity of the included assets in the KCGI ultra-long bond fund could lead to relatively larger valuation gains when market interest rates fall.'
The target duration of the investment assets for this fund is approximately 16 years. The expected yield maturity as of Nov. 11 is 2.69% annually. If purchased before 5 p.m., the two-business-day pricing will apply, while redemptions before 5 p.m. will be paid at a three-business-day pricing. The fee structure varies based on subscription conditions, with a standard of 0.38% for the Ce class.