KOSDAQ Active ETFs: High Volatility and Underperformance Amid Initial Hype
The newly launched KOSDAQ active ETF market has attracted significant inflows, especially into funds heavily weighted in the biotech sector, leading to heightened volatility and a need for investor caution. Funds such as Samsung Active and Timefolio have incorporated many large-cap biotech stocks, making sector-wide price movements more sensitive to individual company news and events. As a result, these actively managed ETFs are exhibiting price movements similar to passive funds, raising questions about the effectiveness of active strategies in this context.
Performancewise, the KoAct, TIME, and PLUS KOSDAQ150 active ETFs have all underperformed the KOSDAQ index since their launch. After an initial surge in retail investor participation, returns ranging from -8% to -15% have failed to live up to expectations, lagging behind the -5.95% decline of the index itself. The decline was exacerbated by eroding market trust in major holdings like Samchundang Pharm, which pushed domestic biotech ETFs such as Real Bio TOP10 Active and TIGER Technology Transfer Bio Active down by 20% and 16%, respectively.
In contrast, US and Chinese biotech ETFs have demonstrated resilience and positive returns, posting gains of 6% and 9%, respectively, thanks to strong results from individual companies. Given the concentration risk and persistence of volatility in these new Korean active ETFs, investors are advised to approach with caution.
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