50-50 split between S&P 500 and short-term US Treasuries
Available for 100% allocation in DC and IRP pension accounts
Mirae Asset Global Investments will list the TIGER US S&P500-Treasury Blended 50 ETF on Tuesday, splitting its portfolio equally between the S&P 500 index and short-term US government bonds.
Kim Dong-myung, head of the bond ETF management division at Mirae Asset Global Investments, said the product is "well suited for long-term pension investors who want to pursue the long-term growth potential of the leading US index while using short-term government bonds and dollar assets to manage volatility." He made the remarks at a web seminar held Monday morning on the company's YouTube channel, TIGER ETF, to mark the new listing.
The S&P 500 has risen roughly 30-fold over the approximately 40 years since 1986, posting an average annual gain of about 9.1 percent. Mirae Asset Global Investments said it designed the product to combine the S&P 500 — a core pension asset — with short-term US Treasuries, allowing investors to pursue both growth and stability.
The TIGER US S&P500-Treasury Blended 50 ETF is a bond-blended product that invests equally in the S&P 500 and US government bonds with a remaining maturity of zero to one year. It employs a daily rebalancing strategy that maintains a 50-50 weighting between the two assets, trimming the allocation to whichever asset has risen more and adding to the one that has risen less.
"Without trying to predict the market, the fund aims to keep asset weightings constant and reduce volatility and maximum drawdown compared with a 100 percent equity allocation," Kim said.
Another distinguishing feature is that the entire portfolio is denominated in dollar assets. Interest income from the short-term US Treasuries serves as the primary source of monthly distributions. Investors can also expect the added effect of dollar-asset exposure through fluctuations in the won-dollar exchange rate.
"The dollar is functioning as a more direct safe-haven asset than bonds during equity market downturns," Kim said. "The pattern of the dollar acting as an effective inflation hedge will continue to repeat in the future."
The ETF is eligible for 100 percent allocation within defined-contribution and individual retirement pension accounts. Combined with an equity-type S&P 500 ETF, it allows investors to increase their overall S&P 500 exposure while staying within the retirement pension limit on risky-asset investment.
For example, allocating 70 percent — the maximum permitted for risky assets — to the TIGER US S&P500 ETF and the remaining 30 percent to the TIGER US S&P500-Treasury Blended 50 ETF would result in a total portfolio of 85 percent S&P 500 and 15 percent short-term US Treasuries.
Mirae Asset Global Investments also highlighted the strength of its TIGER US S&P500 ETF. The fund's net assets stand at 20.36 trillion won ($15 billion), making it the first overseas equity ETF to surpass the 20 trillion won mark.
Kim said the new product can also serve as an investment strategy for building a dollar-asset portfolio by accumulating S&P 500 exposure and US Treasuries together over the long term within a pension account.
moon@heraldcorp.com
