What is the FTSE South Korea Capped Index?

The FTSE South Korea Capped Index is a market capitalization-weighted index maintained and calculated by FTSE Russell. It represents a broad range of large- and mid-cap South Korean stocks and applies a capping methodology to ensure no single issuer exceeds 25% of the index weight, while issuers with weights above 5% do not cumulatively exceed 50% of the index weight.

How does the RISR ETF work?

The RISR ETF operates using a passive or indexing investment approach. It seeks to closely replicate the component securities of the FTSE South Korea Capped Index, either through a replication strategy (investing in all index components) or a representative sampling strategy (investing in a sample of securities that resemble the index profile).

What types of companies are included in the FTSE South Korea Capped Index?

The FTSE South Korea Capped Index includes companies from various sectors, such as technology, financials, consumer goods, healthcare, and more. As of May 31, 2023, the index comprised 161 securities with diverse capitalizations ranging from $241 million to $365.42 billion.

Does the RISR ETF use derivatives in its investment strategy?

Yes, the RISR ETF may use equity futures, equity index futures, equity total return swaps, foreign currency forward contracts, and/or currency futures contracts to enhance returns, better track the index performance, manage cash and income, and manage currency exposures.

4 min read

By Beqa Bumbeishvili, ETF Insider

What is the RISR ETF ?

RISR ETF: Overview

The RISR ETF is an actively-managed exchange-traded fund (ETF) designed to provide protection against rising interest rates while generating current income under stable interest rate conditions. The fund primarily invests in interest-only mortgage-backed securities (MBS IOs) and U.S. Treasury bonds to achieve its objectives.

RISR ETF Underlying and Exposure: What Does It Track and How?

The RISR ETF's underlying assets consist of interest-only mortgage-backed securities (MBS IOs) and U.S. Treasury bonds. MBS IOs are fixed-income instruments that represent an interest in a pool of mortgages, and they generate income by collecting and distributing interest payments from a pool of mortgages to investors, without any principal payments. The ETF aims to achieve a desired duration target of approximately negative ten years, which means its market value is projected to increase as interest rates rise, providing protection against falling valuations of most fixed income instruments.

RISR overlap What is the RISR ETF ?

RISR ETF: Benefits to Invest in This ETF

Investing in the RISR ETF comes with several benefits. Firstly, the fund serves as an interest rate hedge, providing protection against rising interest rates. Additionally, MBS IOs tend to perform well in a rising interest rate environment as the rate at which borrowers prepay or refinance their mortgages decreases. The ETF's portfolio is also structured to offset potential declines in MBS IO valuations with gains in U.S. Treasury positions, which have a positive duration.

RISR ETF: Considerations Before Investing

While the RISR ETF presents attractive features, investors should consider certain factors before investing. The fund's non-diversified nature means it may concentrate its investments in a smaller number of issuers, potentially increasing risk. Moreover, the ETF's performance may be influenced by factors such as historical yield levels, inflation, economic growth, and other macro-environment determinants. Investors should carefully assess their risk tolerance and investment objectives before adding the RISR ETF to their portfolio.

Conclusion

The RISR ETF offers investors a unique opportunity to gain exposure to interest-only mortgage-backed securities and U.S. Treasury bonds while seeking protection against rising interest rates. However, like any investment, it comes with its own set of risks and considerations. It is crucial for investors to conduct thorough research and seek professional advice before making any investment decisions.

Disclaimer:
This article is for informational purposes only and does not constitute investment advice. The content provided should not be construed as providing any investment advisory services. Investors should consult with a financial advisor before making any investment decisions.

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RISR ETF official page

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FAQ

What is the RISR ETF?
The RISR ETF, also known as the [actual name of the ETF], is an exchange-traded fund that aims to provide investment results that closely correspond to the performance of the FTSE South Korea Capped Index.
What is the FTSE South Korea Capped Index?
The FTSE South Korea Capped Index is a market capitalization-weighted index maintained and calculated by FTSE Russell. It represents a broad range of large- and mid-cap South Korean stocks and applies a capping methodology to ensure no single issuer exceeds 25% of the index weight, while issuers with weights above 5% do not cumulatively exceed 50% of the index weight.
How does the RISR ETF work?
The RISR ETF operates using a passive or indexing investment approach. It seeks to closely replicate the component securities of the FTSE South Korea Capped Index, either through a replication strategy (investing in all index components) or a representative sampling strategy (investing in a sample of securities that resemble the index profile).
What types of companies are included in the FTSE South Korea Capped Index?
The FTSE South Korea Capped Index includes companies from various sectors, such as technology, financials, consumer goods, healthcare, and more. As of May 31, 2023, the index comprised 161 securities with diverse capitalizations ranging from $241 million to $365.42 billion.
Does the RISR ETF use derivatives in its investment strategy?
Yes, the RISR ETF may use equity futures, equity index futures, equity total return swaps, foreign currency forward contracts, and/or currency futures contracts to enhance returns, better track the index performance, manage cash and income, and manage currency exposures.

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