Samsung Asset Management to launch ETF tracking Total Return Index

2017.11.08 14:50:23 | 2017.11.08 14:50:55

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South Korea’s Samsung Asset Management will launch the country’s first exchange traded fund (ETF) that reinvests dividends.

According to the nation’s stock exchange operator Korea Exchange (KRX), Samsung Asset Management will list KODEX MSCI Korea TR ETF that tracks Total Return (TR) Index on the main index Kospi for foreign investors on Thursday. TR Index reflects not only changes in the price of underlying assets but also reinvestments of dividends paid to investors.

Samsung Asset Management also plans to launch KODEX 200 TR ETF that tracks Kospi 200 TR Index on Nov. 21 for local institutional and retail investors. Mirae Asset Global Investments Co. is also expected to release a similar ETF product tracking TR Index.

ETF is a type of fund that tracks a stock index like Kospi, a commodity, bonds, or a basket of assets like an index fund. A TR ETF is gaining popularity as it offers higher yields by reflecting all gains from the reinvestment of all distributions such as interest, capital gains and dividends. In the U.S., ETF products linked to TR Index are more popular than conventional ETFs - SPDR S&P 500 ETF Trust accounting for 9.6 percent of the U.S. equity ETF market and iShare Core S&P 500 ETF boasting asset size of $134.3 billion are all benchmarked against TR Index.

However, investors of ETFs tracking TR Index would have to pay more taxes than conventional equity ETF holders. In Korea, dividend income is tax-free, but TR Index-linked ETFs are taxable because dividends are reinvested.

By Han Ye-kyung and Choi Mira

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