Mirae Asset rolls out new covered call ETFs

Mirae Asset Global Investments, South Korea’s leading asset management firm, will launch two new covered call exchange-traded funds, focusing on sustainable payout.

The asset manager is to list the Tiger 200 Target Weekly Covered Call ETF and the Tiger Korea Dividend Dow Jones Weekly Covered Call ETF on the Korea Exchange on Tuesday.

Both products are anchored on the target covered call strategy, which enables investors to generate income by selling call options on owned stocks while simultaneously setting a predefined target exit price for the underlying shares.

Mirae Asset aims for a steady 7 percent annual distribution rate for the Tiger 200 Target Weekly Covered Call ETF, and 10-12 percent for the Tiger Korea Dividend Dow Jones Weekly Covered Call ETF, including stock dividends.

While the ETFs feature a lower payout rate than domestic covered call ETFs, which have posted an average distribution yield of 17 percent, Mirae Asset considers this approach to be more sustainable.

“While the Kospi 200 has delivered an average annual return of around 8 percent over the past 20 years, domestic covered call ETFs have posted an average distribution yield of 17 percent, raising concerns over potential long-term capital erosion,” Yoon Byung-ho, head of the asset manager’s strategic ETF portfolio management division, said at a press event held in central Seoul, Thursday.

“The new ETF products were designed to avoid the lure of excessive payouts, with a focus on sustainable cash flow and capital growth based on the Korean equity market,” he added.

Similar to other ETF products, the newly launched covered call ETFs aim to provide retirees with sustainable cash flow, but over a longer time horizon.

“Mirae Asset’s Tiger ETFs are taking the lead in fostering a sound investment culture in terms of monthly dividend distribution,” said Chief Officer Nathan Nam-ki Kim, heading Mirae Asset Global Investments’ ETF portfolio management.

“We will work to provide more detailed disclosures, enabling investors to clearly distinguish between income gains and capital gains, while also providing education to help establish a long-term investment mindset,” he said.

silverstar@heraldcorp.com