New options for safety-oriented investors

[Kakao Bank]
[Kakao Bank]

Kakao Bank is launching an equity-linked bond fund that pays an annualized return of 7.4% based on investment duration when the KOSPI 200 index meets a set condition.

Kakao Bank announced Tuesday the launch of a principal-protected ELB fund. The first product, marketed as the "KOSPI 200 No-Drop, 7.4% Annual Return" fund, is open for subscription through Oct. 30.

An ELB, or equity-linked bond, is structured to preserve principal while targeting returns above a fixed deposit rate by tracking movements in a stock index. It is considered an investment option that offers stability during periods of interest rate uncertainty while still pursuing returns that exceed standard deposit rates.

The product evaluates the KOSPI 200 every three months. If the index is at or above its level at the start of the investment period, the principal and agreed-upon return are paid out and the product is redeemed early. If the condition is not met, the investment continues until the next evaluation date.

Holding the product to maturity targets full principal repayment, though principal losses can occur due to the issuer's credit risk or early redemption.

For example, if the KOSPI 200 stands at 800 points on the start date, early redemption is triggered if the index is at or above 800 points at the three-month evaluation. The return paid at that point is calculated at an annualized rate of 7.4% prorated to the three-month holding period.

The same evaluation is repeated every three months thereafter. Even if early redemption conditions are not met, the product targets full principal repayment at the three-year maturity as long as no issuer credit event occurs. Because the investment period can lengthen depending on whether conditions are met, customers should consider their cash management plans before subscribing.

Customers can subscribe through the fund menu under the investment tab on the Kakao Bank app. Searching "fund" in Kakao Bank AI also navigates to the same menu.

Kakao Bank became the first internet-only bank to launch a fund sales service under its own license in January 2024. The number of products on offer has grown from six at launch to 80, and the sales balance as of the first half of this year surpassed 1.8 trillion won ($1.35 billion).

"We launched the ELB fund for customers looking for new investment opportunities during a period of high market volatility," a Kakao Bank official said. "We will continue to strengthen our product lineup so customers can choose investment products that suit their risk appetite and market conditions."

Meanwhile, funds are not covered by the deposit protection scheme. Principal losses can occur through redemption fees if the product is redeemed or canceled before maturity, and losses may also result from an issuer credit event.


forest@heraldcorp.com