[Edaily reporter Lee Yong-seong] Korea Investment Trust Management announced on the 17th that its two listed index funds (ETFs), ‘ACE 15% Premium Distribution ETFs,’ ranked among the top performers in terms of one-month returns among domestic listed covered call ETFs recently.
Covered call ETFs listed on the KOSPI, among 22 products, were led by the ‘ACE US Semiconductor 15% Premium Distribution (Synthetic) ETF’ (14.58%) and the ‘ACE US Big Tech+ 15% Premium Distribution (Synthetic) ETF’ (13.37%) in terms of one-month returns as of the 14th. Furthermore, the ‘ACE US 500 15% Premium Distribution (Synthetic) ETF’ (2.84%) ranked fifth in returns.
The ACE 15% Premium Distribution ETF series are covered call products that Korea Investment Trust Management first listed in April, utilizing zero-day options (0DTE) – a first in Korea. Normally, option premiums tend to increase as the maturity date approaches. However, based on data analyzed by Korea Investment Trust Management (from November 2022 to November 2023), the total premium collected daily using 0DTE options during the same period was higher than with monthly options.
In addition to 0DTE options, the strategy involves utilizing out-of-the-money (OTM) 1% options that partially replicate market performance. Through OTM 1% options, not only call option premiums but also daily returns of the underlying asset up to 1% can be reflected in the portfolio’s performance. With an annual target distribution rate of 15% for all three products, it appears that Korea Investment Trust Management has chosen this management strategy to achieve a high distribution rate.
In particular, the strategy of employing 0DTE OTM 1% options has led to stable distribution payouts for investors. As of the 12th, according to Korea Investment Trust Management’s disclosure standard, the June distribution rate for the ACE 15% Premium Distribution ETF series exceeded the monthly target distribution rate (1.25%) calculated simply on a monthly basis, surpassing the target within the first month following listing.
Individual product distribution rates for June in the ACE 15% Premium Distribution ETF series were calculated as follows: ACE US 500 15% Premium Distribution (Synthetic) ETF at 1.27%, ACE US Semiconductor 15% Premium Distribution (Synthetic) ETF at 1.36%, and ACE US Big Tech+ 15% Premium Distribution (Synthetic) ETF at 1.37%. These rates correspond to the top three distribution rates among domestically listed dividend ETFs. As all three products distribute mid-month, distribution payments are scheduled for the 18th.
Nam Yong-soo, Head of ETF Management at Korea Investment Trust Management, commented, “After overcoming the limitations of the traditional covered call strategy, which faces challenges in tracking indexes, we introduced the ACE 15% Premium Distribution ETF series.” He added, “Thanks to the excellent performance of the three products since listing, steady inflows of funds from individual investors have been ongoing.”
Furthermore, he stated, “Taking into consideration the structure of covered call ETFs where losses can occur if the decline in the underlying asset exceeds the option premium, the ACE 15% Premium Distribution ETF series, which includes upward-trending underlying assets (US large-cap high-quality companies, US semiconductor companies, US big tech companies), will be a good investment vehicle.”
It should be noted that the ACE 15% Premium Distribution ETF series are all performance dividend products, which means that principal losses may occur depending on the operating results.