81.9 billion won flows into US semiconductor ETF alone

Top performer among overseas covered-call ETFs

Three-fund cumulative distribution yield reaches 17.48–20.55% over past year

The three ACE Daily Target Covered-Call ETFs managed by Korea Investment Trust Management, which have drawn more than 100 billion won in retail net purchases since the start of the year. [Korea Investment Trust Management]
The three ACE Daily Target Covered-Call ETFs managed by Korea Investment Trust Management, which have drawn more than 100 billion won in retail net purchases since the start of the year. [Korea Investment Trust Management]

As stock market volatility has widened, retail investors have poured more than 100 billion won ($72.6 million) into Korea Investment Trust Management's three ACE Daily Target Covered-Call ETFs since the start of the year. The surge reflects growing demand for regular distribution income through option premium strategies.

Korea Investment Trust Management said Monday that combined retail net purchases in the three ACE Daily Target Covered-Call ETFs had reached 106.7 billion won since the beginning of the year.

By product, the ACE US Semiconductor Daily Target Covered-Call (Synthetic) ETF drew the most money, with retail net purchases reaching 81.9 billion won since the start of the year. The ACE US 500 Daily Target Covered-Call (Synthetic) and ACE US Big Tech 7+ Daily Target Covered-Call (Synthetic) ETFs attracted 14.4 billion won and 10.4 billion won, respectively.

Covered-call ETFs hold underlying assets such as shares while selling call options, using the option premium collected as a source of distribution payments. Korea Investment Trust Management's decision in June to revise its distribution policy — allowing special dividends of up to 3 percent by drawing on accumulated fund reserves and investment performance — also appears to have boosted retail buying.

On the performance front, the ACE US Semiconductor Daily Target Covered-Call (Synthetic) stood out. Based on the Korea Exchange's previous closing price, its one-year return of 45.96 percent was the highest among overseas covered-call ETFs. The product invests in the US semiconductor industry and pursues distribution income through a zero-days-to-expiration (0DTE) out-of-the-money 1 percent call-option selling strategy.

Distribution payouts were also strong. Over the past year, cumulative per-unit distributions across the three ETFs ranged from 1,879 won to 3,174 won, with cumulative distribution yields of 17.48 to 20.55 percent. The ACE US Semiconductor Daily Target Covered-Call (Synthetic) posted the highest yield at 20.55 percent, followed by the ACE US Big Tech 7+ Daily Target Covered-Call (Synthetic) at 20.54 percent and the ACE US 500 Daily Target Covered-Call (Synthetic) at 17.48 percent.

"Demand for covered-call ETFs, which provide downside protection and stable monthly distributions in a volatile market, will continue for now," said Nam Yong-su, head of the ETF division at Korea Investment Trust Management. "The three ACE Daily Target Covered-Call products were built around underlying assets expected to trend upward over the long term, helping offset the typical covered-call drawback of capped upside."

He added a note of caution: "However, if the underlying index falls sharply, investors could lose principal, so they should carefully compare each product's growth potential and option strategy before investing."

Korea Investment Trust Management has also moved to restructure its business to focus more squarely on ETFs. At a board meeting on Thursday, it approved a split-merger agreement to spin off its equity fund and money market fund (MMF) divisions and absorb them into Korea Investment Value Asset Management. The split-merger is scheduled to take effect on Jan. 1 next year.


hajun825@heraldcorp.com