Hana Asset Management is drastically cutting fees on its bond-equity hybrid exchange-traded funds as competition intensifies for Korea's retirement pension market.
The asset manager will reduce the total expense ratio on its "1Q US S&P500 US Treasury Bond Mixed 50 Active" ETF from 0.15 percent to 0.05 percent annually, effective January 30, according to financial industry sources on Friday. The fund invests 50 percent each in the S&P 500 index and short-term US Treasury bonds.
The fee cut aims to attract pension fund inflows as bond-equity hybrid ETFs emerge as a core investment vehicle for retirement savings designed for long-term holding.
Bond-equity hybrid ETFs have gained rapid popularity in the pension market because they enable investors to achieve effective equity exposure while being classified as safe assets. Korean retirement pension accounts are subject to a 70-30 rule requiring at least 30 percent allocation to safe assets.
With growing expectations for US interest rate cuts, demand is rising among pension account holders to maximize equity exposure. By placing bond-equity hybrid ETFs in the safe asset portion and US index ETFs in the risk asset portion, investors can effectively allocate up to 85 percent of their portfolio to US equities.
Competition around bond-equity hybrid ETFs is spreading across the asset management industry. Korea Investment Management recently renamed its "ACE US S&P500 Bond Mixed Active" fund to "ACE US S&P500 US Treasury Bond Mixed 50 Active" and raised the equity allocation from 30 percent to 50 percent.
Hana Asset Management has positioned bond-equity hybrid ETFs as flagship products. Its "1Q US Nasdaq100 US Treasury Bond Mixed 50 Active" ETF, featuring a 0.05 percent annual expense ratio, surpassed 100 billion won in net assets in November, approximately two months after listing. The combination of low fees and up to 50 percent Nasdaq 100 exposure helped the fund attract capital faster than any other bond-equity hybrid ETF.
Hana Asset Management is also cutting fees on equity ETFs. The company will rename its KOSPI 200 active fund from "1Q K200 Active" to "1Q 200 Active" and reduce its expense ratio from 0.18 percent to 0.01 percent annually.
"We made this fee reduction to contribute to enhancing long-term returns for pension investors while also contributing to realizing the KOSPI 5000 era," a Hana Asset Management official said.
