Fund tracks KIS Composite Bond Index, seeks excess returns; invests selectively in bonds rated AA- or higher

KCGI Asset Management launched the KCGI Korea Composite Bond Fund on Friday, targeting domestic investment-grade mid-to-long-term bonds. [Courtesy of KCGI Asset Management]
KCGI Asset Management launched the KCGI Korea Composite Bond Fund on Friday, targeting domestic investment-grade mid-to-long-term bonds. [Courtesy of KCGI Asset Management]

KCGI Asset Management said Friday it has launched the KCGI Korea Composite Bond Fund, which invests in domestic investment-grade mid-to-long-term bonds and is designed to generate stable interest income and capital gains during a period of falling interest rates.

The fund tracks the KIS Composite Bond Index, which represents South Korea's domestic bond market valued at roughly 2,200 trillion won ($1.44 trillion), while employing a flexible bond management strategy to pursue returns that exceed the index. It is intended primarily for institutional investors and individual customers interested in bond investment.

With this launch, KCGI Asset Management has expanded its fixed-income fund lineup to include mid-to-long-term bond funds, adding to its existing short-term bond fund (maturities within six months) and medium-term bond fund (maturities of two to three years).

The fund invests selectively in domestic bonds rated AA- or higher with remaining maturities of three months to 50 years. Its benchmark weights the KIS Composite Bond Index (AA- or higher), composed of high-grade domestic bonds, at 90 percent and the benchmark interest rate at 10 percent.

The KIS Composite Bond Index comprises a diverse range of investment-grade bonds, including government bonds, monetary stabilization bonds, corporate bonds and financial bonds. The index spans a wide variety of issuers and maturities, reducing default risk and enhancing diversification, and is widely used as a benchmark by institutional investors. As of June 10, the benchmark's average duration stood at 4.87 years and its yield to maturity at 3.97 percent, reflecting higher bond yields following recent interest rate increases.

To strengthen its bond management capabilities, KCGI Asset Management elevated its bond management team to a full division in July last year and brought in Hong Sa-wook, a former head of the bond management division at Mirae Asset Global Investments, as division head.

Beyond fixed-income products, KCGI Asset Management has been expanding into public offering funds and the pension business. Target date funds have seen strong growth driven by inflows of retirement pension assets, helping to expand assets under management.

"Although interest rates have continued to rise on the back of inflation and growth that exceeded market expectations, further rate increases over the medium to long term are expected to be limited given that a significant portion has already been priced in," a company official said. "We will pursue stable excess returns through diversification across a range of bond strategies."

The Korea Composite Bond Fund carries an investment risk rating of 5 (low risk), with a total expense ratio of 0.138 percent for the CF class. There is no redemption fee.


hajun825@heraldcorp.com