Rapid Growth and Polarization Evident in Korea’s Active ETF Market
There has been a surge in capital inflows into Korea’s domestic equity active ETFs this year, driving notable momentum in the KOSDAQ market. Assets under management (AUM) in domestic equity active ETFs have soared from just KRW 34.8 billion in 2020 to KRW 23.5 trillion in recent data, with a monthly average inflow of KRW 986.3 billion observed this year. Flagship funds like 'KoAct KOSDAQ Active' have seen cumulative inflows in the trillions of won, underlining strong investor interest. Over the last six months, some leading active ETFs have reported an impressive 54.5% absolute return, though notably, 38% of all active ETFs have underperformed their benchmarks, highlighting a widening polarization in returns.
The total AUM of Korea’s ETF market has surpassed KRW 404 trillion, while the AUM for active ETFs alone has crossed KRW 100 trillion, reflecting their rapid acceleration. This growth is driven by increased demand from investors seeking alpha and a strategic shift among asset managers away from passive products. Recent regulatory changes, including the abolition of the 'correlation coefficient 0.7' rule, are expected to further fuel market expansion and introduce a broader variety of new products. Nevertheless, the persistence of performance divergence signals that investor protection and product differentiation will be key challenges ahead.
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