Structural Shifts and Growth Outlook in the KOSDAQ Active ETF Market
Recently launched KOSDAQ active ETFs have attracted strong interest from individual investors, with net purchases totaling KRW 1.226 trillion. KoAct KOSDAQ Active, TIME KOSDAQ Active, and PLUS KOSDAQ150 Active ETFs each pursue differentiated strategies—focused on growth industries, large caps, and selective blue chips or promising stocks respectively—aiming to deliver returns that outperform their respective benchmarks. This surge has driven higher trading volumes and channeled investments into undervalued small- and mid-cap stocks, as government policies and asset manager strategies align to foster a structural evolution in the KOSDAQ market.
Regulatory reforms have further accelerated capital inflows, removing the requirement for active ETFs to maintain a set correlation with their reference indices. Fund managers are now freer to adjust holdings and weightings, leading to a potential increase in the weight of growth-oriented small- and mid-cap stocks and greater performance differentiation among products. While these changes are expected to spur innovation, concerns about increased market volatility also remain.
Despite the external shocks from geopolitical tensions in the Middle East, the KOSDAQ market has experienced reduced volatility, largely due to inflows into active ETFs and increased participation by institutional investors. However, the risk profile of small caps necessitates continued caution. Additionally, with 38 companies set for delisting by 2025 and a phased increase in minimum market capitalization requirements, the KOSDAQ market is striving to restore investor trust and enhance the investment environment. Investors can now choose between active ETFs, which emphasize fund manager discretion, and passive ETFs that track indices, according to their preferred investment style.
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