Growth and Profitability Challenges in the Korean ETF Market
The Korean ETF market is experiencing rapid growth, but many ETF products are struggling to achieve profitability. According to a survey, 12% of all ETFs have annual management fee revenues of less than 10 million won. This is attributed to the 'price war' as asset management companies cut total fees to gain market share. Moreover, only 9% of ETFs achieve annual revenues exceeding 1 billion won, highlighting the high proportion of low-profit ETFs. Notably, KB Asset Management holds the most number of low-profit ETFs, reflecting the challenges in their profitability strategy.
Despite these issues, the Korean ETF market continues its growth trajectory, reaching a scale of 250 trillion won this month. The number of large ETFs with over 1 trillion won in net assets has increased to 53, signaling a shift in market dynamics. While the market was previously dominated by interest rate products, it is now shifting towards overseas equity ETFs. This change is driven by active participation from individual investors and the expansion of non-face-to-face investing. It can be seen as a positive development, offering investors a wider range of options and reflecting the globalization of investments.
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