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Korea Investment Management launches series of ETFs tracking Solactive indices: KIM ACE


Frankfurt-based index provider, Solactive, writes that the technology sector is often associated with innovation and rapid growth, consistently introducing disruptive products and services, promising substantial potential for growth and value creation for investors.

In line with this vision, Solactive writes that Korea Investment Management has expanded its engagement with Solactive to launch a series of three ETFs tracking the Solactive US Big Tech Top 7 Plus Index.

The Solactive US Big Tech Top 7 Plus Index comprises the top 10 largest future-oriented technology companies in the United States, listed on NASDAQ. These technology-related companies are characterized by their primary involvement in producing or providing technology-related products or services or offering consumer products and services closely integrated with proprietary technology. Industries represented in the index encompass artificial intelligence, robotics, internet services, autonomous vehicles, virtual reality, big data, computer science, cybersecurity, and digital transformation, among others.

The KIM ACE US Big Tech TOP 7 Plus ETF, KIM ACE US Big Tech TOP 7 Plus Leveraged (Synthetic) ETF, and KIM ACE US Big Tech TOP 7 Plus Inverse (Synthetic) ETF allocate a significant portion, approximately 95 per cent, to seven of the top 10 companies, collectively known as the “Magnificent 7,” which are Apple, Microsoft, Alphabet (Google’s parent company), Amazon, NVIDIA, Tesla, and Meta Platforms.

These ETFs employ a modified equal-weighting methodology. This approach addresses the potential drawbacks of traditional market-capitalization weighting, where a few top companies can dominate the index. In the case of these three ETFs, weights are distributed based on market capitalization ranks. The top one-five companies each receive a 15 per cent weight, the six-seven companies each receive a 10 per cent weight, and the remaining companies ranked from position eight to 10 are equally weighted to reach a total weight of 100 per cent.

Leveraged & Inverse ETFs

The three ETFs differ in their methodologies for tracking the underlying index. The KIM ACE US Big Tech TOP 7 Plus ETF tracks the Solactive index at a 1x ratio. In contrast, the KIM ACE US Big Tech TOP 7 Plus Leveraged (Synthetic) ETF and the KIM ACE US Big Tech TOP 7 Plus Inverse (Synthetic) ETF primarily invest in off-exchange derivative products (swaps) linked to 2x performance and -1x performance of the underlying index, respectively. This strategy aims to provide investors the flexibility to hedge against rising and falling big tech stock prices.

During market uncertainty, Leveraged and Inverse (L&I) products have gained popularity for their ability to facilitate efficient short-term portfolio reallocations. Leverage enables investors to take positions with reduced capital requirements, while inverse products serve as effective tools for tactical risk hedging and diversification.

Timo Pfeiffer, Chief Markets Officer at Solactive, says: “We are delighted to expand our partnership with KIM and continue to serve as one of their trusted index providers. US technology-related companies offer significant growth potential, and these ETFs provide concentrated exposure within the sector. Additionally, leveraged and inverse products are increasingly valuable for investors seeking to capitalize on short-term market views, enhance diversification, or hedge their positions.”

Yong Soo Nam, Head of ETF Investment Management Division in Korea Investment Management, says: “We are pleased to collaborate with Solactive with another great product series. KIM ACE US Big Tech Top 7 Plus ETF series is a product that has a focus on US big tech companies, especially on the top 7 ones. We believe this can appeal to those who prefer a concentrated portfolio in US big tech companies. Furthermore, by offering the (2x) leveraged, (-1x) inverse, and (1x) delta one products simultaneously in the series, we aim to offer a whole investment vehicle package for investors who prefer volatility in changing market conditions.”

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