Mid-month and month-end payouts combined

Tax benefits add to appeal

[Provided by Samsung Asset Management]
[Provided by Samsung Asset Management]

Samsung Asset Management has proposed an investment portfolio that combines two covered-call exchange-traded funds tracking the KOSPI 200 — South Korea's benchmark index — to deliver distributions twice a month.

The asset manager said Thursday that investors can narrow their cash-flow cycle and maximize tax-exemption benefits by holding both the KODEX 200 Target Weekly Covered Call and the KODEX 200 Covered Call Active together, as the two products pay distributions at different times of the month.

The KODEX 200 Target Weekly Covered Call, which pays distributions around the 15th of each month, targets an annual distribution rate of roughly 17 percent — securing about 15 percent in option premiums through weekly call-option sales and adding an equity dividend yield of approximately 2 percent.

The KODEX 200 Covered Call Active, which pays distributions at month-end, pairs a diversified options strategy across varying maturities with an active approach that dynamically adjusts exposure to leading sectors.

Combining the two products allows investors to receive cash flows twice a month — around the 15th and at month-end. Option premiums, the primary source of distributions, are excluded from taxable income and do not count toward the comprehensive financial income tax threshold. Capital gains from domestic equity trading are also tax-exempt.

Both products continue to attract inflows. The KODEX 200 Target Weekly Covered Call has net assets of 5.92 trillion won ($4.36 billion), with individual net purchases since listing reaching 3.84 trillion won. The KODEX 200 Covered Call Active, which listed in July, has also grown to 953.9 billion won in net assets, with cumulative individual net purchases of 858.4 billion won.

"Domestic equity covered-call ETFs are a useful alternative for investors focused on after-tax real returns, thanks to the tax exemption on option premiums," said Jeong Jae-wook, head of Samsung Asset Management's ETF Management Team 3. "By breaking up the distribution cycle into twice a month, investors can manage cash flows while also pursuing index participation."

Samsung Asset Management also published a beginner's guide titled "Mastering ETFs in One Week" last month, which lays out a second-half market outlook and ETF strategies for various market scenarios.


jiyun@heraldcorp.com