Fund tracks KIS Composite Bond Index, selects investment-grade bonds rated AA- or higher

[Provided by KCGI Asset Management]
[Provided by KCGI Asset Management]

KCGI Asset Management said Friday it has launched the KCGI Korea Composite Bond Fund, a product investing in high-grade, medium-to-long-term domestic bonds. The fund is designed to generate both stable interest income and capital gains amid a falling interest rate environment.

The fund tracks the KIS Composite Bond Index, a benchmark representing South Korea's domestic bond market valued at approximately 2,200 trillion won ($1.44 trillion), while pursuing returns above the index through flexible bond management strategies tailored to market conditions. It is aimed primarily at institutional investors and individual customers interested in bond investment.

With the launch, KCGI Asset Management has expanded its bond fund lineup to include medium-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 selects domestic bonds rated AA- or higher with remaining maturities ranging from three months to 50 years. Its benchmark is calculated by weighting the KIS Composite Bond Index — composed of investment-grade domestic bonds rated AA- or higher — at 90%, with the benchmark interest rate accounting for the remaining 10%.

The KIS Composite Bond Index comprises a range of high-grade bonds including government bonds, monetary stabilization bonds, corporate bonds and financial bonds. Its diversity of issuers and maturities lowers default risk and enhances the benefits of diversification, making it a widely used benchmark among institutional investors. As of June 10, the index's average duration stood at 4.87 years and its yield to maturity at 3.97%, reflecting the impact of 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 its new division chief.

Beyond bond products, KCGI Asset Management has been expanding its business, focusing particularly on public offering funds and the pension sector. Target date funds that have attracted retirement pension assets have shown strong growth, driving expansion of 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 various bond strategies."


hajun825@heraldcorp.com