Shinhan Asset Management's "SOL 200 Covered Call Series" Surpasses KRW 550 Billion in Net Assets

Shinhan Asset Management's flagship domestic index-based monthly distribution covered call exchange-traded fund (ETF) lineup, the "SOL 200 Covered Call Series," has surpassed KRW 550 billion in combined net assets.

On November 11, Shinhan Asset Management said that, according to figures tallied the previous day, the combined net assets of the two ETFs in the SOL 200 Covered Call Series had exceeded KRW 550 billion.

The SOL 200 Covered Call Series consists of the "SOL 200 Target Weekly Covered Call ETF," listed in March, and the "SOL 200 Covered Call Active ETF," newly listed the previous day.

The two ETFs had net assets of KRW 515.3 billion for the Target Weekly ETF and KRW 47.3 billion for the newly listed Active ETF.

Both products invest in domestic stocks based on the KOSPI 200 and secure funds for distributions by selling call options, but differ in how they manage their stock and options portfolios and in their investment objectives.

The SOL 200 Target Weekly Covered Call aims to secure option premiums of around 15% annually and generate regular cash flow. Since making its first distribution in April, it has maintained a stable monthly distribution rate of around 1.3% to 1.4%.

The SOL 200 Covered Call Active combines active management of its stock portfolio and option-selling strategy. It adjusts the weightings of leading stocks based on a comprehensive assessment of the earnings and valuations of KOSPI 200 constituents, supply and demand, and growth drivers by industry. It also flexibly manages its option-selling strategy according to its market outlook and volatility. Through these strategies, it seeks to boost total returns, including capital gains and distributions, and outperform its benchmark.

Another advantage is its "biweekly cash flow" structure, which takes advantage of the difference in distribution schedules. The SOL 200 Target Weekly Covered Call pays distributions at the beginning of each month, while the SOL 200 Covered Call Active pays distributions in the middle of each month, based on the 15th (or the preceding business day if it is a non-business day). Investors can use both products together to create two cash flows, one at the beginning and one in the middle of each month, and choose an investment strategy based on how they intend to use the funds, such as covering living expenses or reinvesting distributions. The first monthly distribution payment date for the newly listed SOL 200 Covered Call Active is December 16.

Both products are domestic equity covered call ETFs and are subject to the same tax treatment. In general taxable accounts, capital gains from trading domestic listed stocks and domestic stock index options are tax-exempt, while taxable income, including stock dividends, is subject to a 15.4% dividend income tax rate. Distributions may include tax-exempt income, and the amount actually subject to tax may vary depending on the product's performance, the sources of its distributions, and its tax base price. Both products are eligible for investment through pension savings and retirement pension accounts (DC and IRP). In retirement pension accounts, they may be included up to the 70% limit on investments in risky assets.

"The SOL 200 Covered Call Series is designed to address both the growth potential of domestic stocks and demand for monthly distributions, while allowing investors to choose a management strategy suited to their investment objectives," said Kim Jeonghyeon, head of Shinhan Asset Management's ETF Business Group. "By offering a target-type product focused on regular cash flow and an active-type product that seeks to boost total returns through active management of stocks and options, we have broadened investors' choices. We have also staggered the distribution dates to the beginning and middle of each month to make cash flows more useful."

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