Seoul-based Kiwoom Asset Management has introduced a new ETF offering a portfolio of lower-volatility US equities with sustainable dividend yields.

Kiwoom has launched a US high-div low-vol ETF on KRX.

The Kiwoom KOSEF US Low Volatility Dividend Achievers ETF (373790 KS) has listed on Korea Exchange and comes with an expense ratio of 0.40%.

The fund is linked to the Nasdaq US Low Volatility Dividend Achievers Index, a smart beta index devised and calculated by Nasdaq Global Indexes.

The objective of the strategy is to deliver a quality income opportunity with the potential for capital growth while also offering protection during market drawdowns.

The strategy is based on the thesis that consistent dividend growers are thought to be more likely to share favourable characteristics such as strong balance sheets, a history of stable cash flows, and earnings growth. Consistently increasing dividends is a means for management to signal confidence in their companies’ growth prospects.

Low volatility strategies, meanwhile, have historically delivered broad equity-like returns with less risk. One of the basic tenets of such strategies is that they offer a degree of downside protection, as lower volatility stocks are expected to hold up better when markets fall.

Methodology

The underlying index selects its constituents from the universe of US-listed securities with market capitalizations in the top 75% of the entire US equity market.

The methodology first identifies ‘dividend achievers’ – companies that have grown their dividends consistently for at least ten consecutive years.

To be eligible for inclusion, a firm must also reside in a sector that has exhibited relatively low volatility. The process ranks the 39 Industry Classification Benchmark (ICB) sectors by the inverse of their trailing one-year volatility. Dividend achievers that reside in any of the top ten sectors are selected to form the final index.

Constituents are weighted by the inverse of their one-year trailing volatility, and the index is reconstituted and rebalanced on a quarterly basis.

There are currently 41 stocks in the index.

“We are committed to bringing more innovative investment solutions to Korean investors,” said Jonghyeop Kim, Senior Portfolio Manager of Kiwoom Asset Management. “We are proud to launch the world’s first Low Volatility Dividend Achievers ETF in collaboration with Nasdaq.”

“As an industry pioneer, Kiwoom Asset Management has been introducing many first-of-its-kind investment tools to the Korean investors,” added Joyce Ip, Head of Asia Pacific for Nasdaq Global Indexes. “We have seen tremendous growth globally in passive investment and we look forward to partnering with Kiwoom Asset Management by bringing more innovative and unique investment tools to the market.”