Korean ETF Market Trends: Underperformance of Active ETFs and Evolving Investment Strategies
Despite attracting over 1 trillion KRW from retail investors, Korea’s first KOSDAQ active ETFs have recently posted returns that significantly lag behind both the KOSDAQ index and passive ETFs. The Samsung KoAct and Timefolio TIME KOSDAQ active ETFs fell by 14.8% and 16.8% respectively, reflecting deeper losses than the benchmark index. This underperformance is attributed to portfolio concentration and recent adverse market events.
In response to weak initial performance, active ETF managers have undertaken major portfolio overhauls. Timefolio is now focusing on semiconductor-related stocks, while Samsung Active Asset Management has increased its allocation to bio stocks in an effort to diversify risks. These changes are primarily aimed at recovering deficits and preparing for a potential market rebound.
Meanwhile, the domestic stock market remains weak due to ongoing US-Iran ceasefire uncertainties and profit-taking, leading retail investors to struggle for clear ETF investment direction. Leveraged products such as the 'KODEX Leverage ETF' have seen high net purchases, reflecting investors’ expectations for market rebounds amid volatility. Defensive and stability-oriented ETF choices are also gaining traction in the current downturn.
Separately, Korea Investment Management has published the 'ISA Pension Guidebook', introducing asset management strategies that link ISAs with pension accounts and recommending suitable ETFs for various investor profiles. The guidebook covers practical steps from ISA utilization to retirement planning, including age-specific portfolio strategies and tax-saving tips, supporting the diversification of ETF use among Korean investors.
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