Hanwha Asset Management Expands ETF Exports to Europe and the Middle East

 
Hanwha Asset Management is set to export exchange-traded funds (ETFs) based on South Korea's defense and manufacturing sectors to Europe and the Middle East. This move follows the introduction of related ETFs in the United States last year, as part of a strategy to expand overseas.

According to the financial investment industry on October 14, Hanwha Asset Management plans to list its Korean defense and manufacturing-related ETFs, KDEF and KMCA, in the markets of London, Frankfurt, and Abu Dhabi in the fourth quarter. Although the listings have been delayed from the original schedule, the company aims to complete them by the end of the year.

Through this initiative, Hanwha seeks to broaden its global business and attract local investors. After launching the KDEF defense ETF in the U.S. last year, the company introduced the KMCA manufacturing ETF in May. KDEF focuses on defense, while KMCA invests in six manufacturing sectors, including AI semiconductors, secondary batteries, shipbuilding, defense, power grids, and nuclear energy. The ETFs will be managed under a 'white label' approach, with Hanwha participating in index design and product planning, while a local operator, ETC, will manage the funds.

The expansion into manufacturing investments is driven by increased investment in AI infrastructure and supply chain restructuring. The growth in data center construction is boosting demand not only for memory semiconductors but also for power generation facilities, transformers, and transmission networks. Additionally, the reduction of U.S. dependence on China presents new opportunities for South Korean companies. In the defense sector, Hanwha is focusing on production capacity and delivery competitiveness to meet rising overseas demand.

Samsung Asset Management is also expanding its ETF exports by applying its domestic management strategies to international products. After acquiring a 20% stake in U.S. ETF firm Amplify in 2022, Samsung has introduced three ETFs in the U.S. market, incorporating various investment strategies related to interest rates and commodities. The collaboration with Amplify is yielding synergies in product development and management.

The 'Amplify Samsung SOFR ETF,' launched in November 2023, marks Samsung's first ETF export. This product, linked to the Secured Overnight Financing Rate (SOFR) for U.S. Treasury collateral, utilizes strategies from the domestic 'KODEX U.S. Dollar SOFR Active ETF,' localized for the U.S. market. It has attracted demand from investors seeking stable dollar assets.

Samsung has also introduced a product that combines a covered call strategy with U.S. long-term Treasury bonds. This ETF, based on the iShares 20+ Year Treasury Bond ETF (TLT), sells call options to secure option premiums, distinguishing itself in a market where equity-based covered call ETFs dominate.

Additionally, there are products investing in commodities and related industries. The 'USNG' ETF, launched in May 2022, focuses on the natural gas infrastructure value chain and incorporates strategies from Samsung Active Asset Management. It is the first ETF in the U.S. to concentrate on this sector, with Samsung Active providing portfolio advice and research while Samsung Asset Management's New York branch handles local management.

Since the export of ETFs, there has been an increase in net assets in local markets. As of October 5, KDEF's net assets reached $115.3 million, a 54% increase from the beginning of the year. As of October 13, the net assets of the SOFR ETF stood at $462.9 million, approximately 9.2 times the initial investment.