Korean ETF Market Sees Rapid Growth Amidst Innovation and Risk
Korea's active ETF market is experiencing rapid expansion, with equity-type active ETFs at the forefront of this growth. Total assets under management have surged by more than 70%, and there is a notable concentration toward high-risk products. Unlike in the United States, domestic active ETFs are predominantly used as vehicles to capture specific profit opportunities, but analysts point out a lack of diversity in product strategies. As a result, there are calls for regulatory improvements to support smaller asset managers and to foster the creation of a broader range of ETF products.
Recently, asset management firms have intensified competition by launching bond-mixed ETFs that include Samsung Electronics and SK Hynix. These products blend up to 25% equities with 50% high-quality domestic bonds, making them eligible for 100% allocation within retirement pension accounts—a feature which greatly enhances their appeal. Notably, the 'RISE Samsung Electronics SK Hynix Bond Mixed 50' ETF quickly surpassed 1 trillion KRW in assets, reflecting significant market interest. However, there are growing concerns about excessive concentration risk in a few large-cap stocks.
With impending regulatory changes, financial authorities will soon allow single-stock leveraged ETFs, and next month, 16 leveraged and inverse ETFs based on Samsung Electronics and SK Hynix will be launched. This move may increase volatility and risk in semiconductor stock prices, and smaller asset managers are expected to compete aggressively by offering ultra-low fees.
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