Today, Exchange Traded Concepts has announced that Hanwha Asset Management’s PLUS Korea Defense Industry Index ETF (KDEF ) has begun trading on the NYSE Arca.
KDEF looks to provide similar results to the total return performance of the Korea Defense Industry Index. This fund has a net expense ratio of 0.65%.
“We are enthusiastic to introduce the PLUS Korea Defense Industry Index ETF (KDEF) to the U.S. market,” noted Hanwha CEO Kim Jong-ho. “Expanding on the foundation of our Plus K-Defense ETF listed in Korea, this launch represents an opportunity to provide U.S. investors with exposure to Korea’s defense industry. We appreciate the support of Exchange Traded Concepts in bringing this ETF to the NYSE Arca.”
Building an Index
As the index’s title implies, the Korea Defense Industry Index focuses on South Korean companies engaged in defense-related operations. This includes companies engaged in shipbuilding, satellite telecommunications, civil engineering, and utility system construction, among many others.
To be eligible for inclusion in the index, companies need a minimum market cap of at least $300 billion Korean Won. As of February 5th, 2025, this equates to a little over $206 million in U.S. Dollars.
From there, the index utilizes a large language model to sift through companies for Korean defense companies. To do so, the AI program searches through quarterly reports, company presentations, regulatory filings, and other public news sources.
Once the index has located all its potential investments, it scores companies based on market cap and thematic relevance. The end result of the index is a highly concentrated target size of 20 constituents.
As an additional rule, no individual constituent can surpass 20% of the index’s overall weight. On a quarterly basis, the index gets rebalanced and reconstituted.
At least 80% of KDEF’s investments are invested in securities within its underling index. The fund expects to have its investments concentrated to the same extent that the Korea Defense Industry Index does. As of December 11th, 2024, the index held strong concentration in the Aerospace Products and Parts Manufacturing Industry.
As a thematic ETF, KDEF could accomplish multiple objectives within an investor’s portfolio. By focusing on Korean companies, the fund can provide crucial diversification for traders too tied to U.S. stocks. Meanwhile, the fund also offers a focus on defense companies, giving advisors and investors an interesting tool to build up defense exposure within one’s portfolio.
For more news, information, and strategy, visit ETFDB.
