As the artificial intelligence (AI) bubble talk rattles markets at home and abroad, there is an exchange-traded fund (ETF) smiling alone. It did not draw attention when U.S. and Korean markets surged on tech names, but it has stood out recently as indexes whipsawed and corrected: the "KIWOOM U.S. Tech 100 Monthly Target Hedge Active ETF."
Kiwoom Asset Management applied a "protective put" replication strategy to U.S. tech stocks for the first time and launched this ETF in July. It did not gain much attention at launch, but over the past month, as the Nasdaq in the United States was shaken sharply, it has performed well by proving a clear downside protection effect.
The biggest feature of this ETF is that it concentrates on representative U.S. tech names while avoiding losses. Buying a put option, which can generate revenue when a stock price falls below a certain level, can deliver this effect. Instead of purchasing puts directly, the ETF uses a "delta hedge" technique that replicates option effects by adjusting the stock and bond mix.
When the index rises, it moves like an equity ETF; when the index falls or whipsaws, it shifts into a bond ETF. Using a portfolio insurance strategy, it sets the prior month's closing price (based on the U.S. market) as a kind of revenue preservation target, a "monthly target defense line," then monitors the market daily over the month and adjusts the stock and bond weights (0–95%) to minimize the chance that returns fall below the defense line.
Because the stock and bond allocation adjusts automatically with market conditions, the stock weight increases when the index rises and the bond weight increases when the index falls.
It was first listed on July 22, and over the past four months it posted a 10.27% return. Over the past month through the 21st, when the Nasdaq fell 0.59%, the return was 2.89%.
KIWOOM U.S. Tech 100 Monthly Target Hedge Active is also a monthly dividend ETF that pays a distribution at the end of each month by using U.S. tech dividends and U.S. short-term bond interest revenue.
Lee Kyung-jun, head of ETF management who created this ETF, said, "We focused on the balance between 'loss avoidance' and 'revenue participation' that investors value most," adding, "Individual investors can easily use the risk management strategies mainly used by hedge funds to pursue stable revenue in a period of heightened uncertainty."