Korea Investment Management Lists Single-Stock Leverage Products for Samsung Electronics and SK hynix

Korea Investment Management announced on May 27 that it will newly list two single-stock leveraged products that track twice the daily return of Samsung Electronics and SK hynix shares. The newly launched products are the "ACE Samsung Electronics Single-Stock Leverage" and the "ACE SK hynix Single-Stock Leverage."

Single-stock leveraged products are new offerings introduced by the government to resolve regulatory asymmetry between domestic listed exchange-traded funds (ETFs) and overseas-listed ETFs. With the amendment of the Enforcement Decree of the Financial Investment Services and Capital Markets Act in April, it has become possible to launch such products on the domestic stock market. However, given the high volatility of these products, they are limited to leading domestic stocks with strong market capitalization and trading volume. As of now, only Samsung Electronics and SK hynix are eligible for these offerings.

The cost competitiveness stemming from the lowest management fees is cited as the biggest advantage of the ACE Single-Stock Leverage series. The annual total expense ratio for each of the two ACE Single-Stock Leverage products is 0.0901%, which is the lowest among all single-stock leveraged products being listed on the same day. Korea Investment Management had initially set the annual total expense ratio at 0.091%, but revised it to 0.0901% on May 22, in consideration of trends in the launch of similar products and to minimize investor trading costs.

The ACE Single-Stock Leverage series is designed with a structure that combines spot and futures positions. Since stable management and tracking efficiency are key for single-stock leveraged products, the strategy involves partially incorporating spot stocks to reduce the impact of supply and demand in the futures market and to lower rollover (contract switching) costs.

One notable feature is that, since the products directly include spot holdings, they are able to pay out distributions. The ACE Single-Stock Leverage series plans to pay quarterly distributions funded by dividends from the included stocks. Therefore, investors can expect not only trading gains from the leverage effect but also additional income through distributions.

However, these products are not diversified investment tools based on an index but are structured to focus investment on a single individual company. As such, assets are fully exposed to the unique risks associated with the underlying company. Single-stock leveraged products can experience rapid losses over a short period and may incur losses even in sideways markets, making them suitable for short-term investment. As performance-based products, there is a risk of principal loss depending on the management results, so investors must fully understand the specific investment risks associated with these products—such as concentration risk and magnified losses—and carefully consider whether their investment objectives and risk tolerance are appropriate before investing.

Nam Yongsoo, head of the ETF Division at Korea Investment Management, stated, "We launched the ACE Single-Stock Leverage series to provide more choices for investors, reflecting the high interest among domestic investors in overseas-listed single-stock leveraged products. Since single-stock leveraged products are structured to track twice the daily return of individual stocks, investors should keep in mind that losses can also be magnified if the price of the underlying asset drops sharply. We hope investors will use these products as tools to respond to the market in the short term, and we will do our utmost to manage them stably."

This content was produced with the assistance of AI translation services.