Hanwha unveils suite of factor-tilt ETFs in Korea

Sep 6th, 2019 | By | Category: Equities

Seoul-based Hanwha Asset Management has launched five smart beta ETFs on Korea Exchange, providing exposure to South Korean equities while tilting towards single-factor risk premia: quality, value, low volatility, low size, or momentum.

Hanwha unveils suite of factor-tilt ETFs in Korea

Hanwha Asset Management has launched five factor-tilt ETFs on Korea Exchange.

The funds are linked to factor-weighted indices created and maintained by South Korean financial data company FnGuide.

The methodology draws its constituents from a universe of common stocks listed on Korea Exchange.

Stocks that do not pass certain liquidity, return on assets (ROA), or return on equities (ROE) thresholds are excluded.

Each index then assigns factor scores to its constituents. Scores reflect a firm’s exposure to the underlying factor relative to other firms in the universe using standardized z-scores.

The quality score is based on ROA, as well as the standard deviation of ROE and ROA; the value score is based on four indicators – net profit, operating profit, cash flow, and total capital – relative to market capitalization; the low volatility score is based on daily and weekly stock price volatility over the past three and five years; the low size score is based on the average market capitalization over the past month; and the momentum score is based on the change in stock price from twelve months ago to one month ago.

The methodology then uses an optimization process which aims to maximize each index’s factor exposure while limiting any single constituent’s active weight (the difference between its weight in the factor index and the parent market-cap-weighted index).

The indices are reconstituted and rebalanced on a quarterly basis.

The funds, along with their ticker codes and underlying indices, are outlined below:

ARIRANG KS Quality Tilt TR ETF (333980 KS)
FnGuide KS Quality Tilt TR Index

ARIRANG KS Value Tilt TR ETF (333970 KS)
FnGuide KS Value Tilt TR Index

ARIRANG KS LowVol Tilt TR ETF (333940 KS)
FnGuide KS LowVol Tilt TR Index

ARIRANG KS LowSize Tilt TR ETF (333950 KS)
FnGuide KS LowSize Tilt TR Index

ARIRANG KS Momentum Tilt TR ETF (333960 KS)
FnGuide KS Momentum Tilt TR Index

Each ETF comes with an expense ratio of 0.25%.

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