Solactive has announced that Hanwha, in its first engagement with the German index provider, and Mirae, expanding their partnership with the company, have launched each a new ETF that tracks the Solactive SOFR Daily Total Return Index.
Solactive writes that the products offer an accumulating daily return strategy designed to provide yields in line with the SOFR rate. The aim of the ETFs is to provide a flexible and efficient tool for financial market participants to access the yield.
The SOFR (Secured Overnight Financing Rate) itself is a benchmark interest rate that is based on transactions in the US Treasury repurchase market. It is considered a more reliable benchmark rate than the London Interbank Offered Rate (LIBOR) since it is based on observable transaction data rather than estimated borrowing rates. The SOFR rate is used for USD denominated derivatives and loans, and it is gradually replacing LIBOR as the benchmark interest rate.
The two ETFs, ARIRANG US DOLLAR SOFR ACTIVE ETF SYNTH and MIRAE ASSET TIGER USD SYNTH-SOFR ACTIVE ETF, listed on Korea Stock Exchange on 9 May under the stock codes 456200.KS and 456610.KS respectively.
Timo Pfeiffer, CMO of Solactive says: “We are once more very pleased to enlarge our activities in the APAC region with our new partner Hanwha and expanding our partnership with Mirae. With these two additional ETFs by those major players, we are excited to see our SOFR index becoming a benchmark in the area. In our current economic environment, we are seeing investors de-risking, leading to increased allocation of capital towards cash, causing demand for investment tools that can provide adequate yields to rise. This product can be a powerful instrument for facilitating tactical asset allocation decisions and can also be seen simply as a safe-haven investment in a high interest rate environment.”.