Asset Plus Asset Management's exchange-traded fund (ETF) 'Asset Plus Korea Leader Active' has a high probability of being designated as a watch list item. This is because it has outperformed the underlying index significantly.
According to the Korea Exchange on 2nd, Asset Plus Korea Leader Active had a correlation coefficient of 0.66 compared to the underlying index as of the previous day. This fell short of the active ETF correlation coefficient criterion of 0.7. Since 5th of last month, this trend has continued for nearly a month, and a watch list announcement is expected.
The ETF correlation coefficient indicates how well it tracks the underlying index. The closer it is to 1, the more the ETF's net worth (NAV) moves similarly to the underlying index.
Typically, it has underperformed compared to the underlying index, resulting in a correlation below the benchmark, but Asset Plus Korea Leader Active is the opposite. The excess revenue compared to the underlying index has increased significantly, widening the correlation. As of the previous day, Asset Plus Korea Leader Active's year-to-date revenue was 43.9%, which exceeded the underlying index 'FnGuide Leader's' year-to-date increase of 12.6% by more than 30 percentage points.
Asset Plus Korea Leader Active can adjust its holdings at the discretion of the fund manager to seek additional revenue due to its active ETF characteristics, and those investments have paid off.
Defense stocks played a significant role. Asset Plus Korea Leader Active invested in Hanwha Aerospace, LIG Nex1, and Hyundai Rotem, which are not included in the underlying index. All three stocks had year-to-date revenue in triple digits percentage as of the peak in July, boosting the revenue of Asset Plus Korea Leader Active.
Asset Plus Korea Leader Active also included K-beauty related stocks such as APR and d'Alba Global. Similarly, it contributed to achieving excess performance with stocks not included in the underlying index.
Asset Plus Korea Leader Active restructured its portfolio by reducing the proportion of leading stocks whose prices have risen significantly. The stocks that Asset Plus Korea Leader Active increased its position in over the past month were in the secondary battery sector, including LG Energy Solution, Samsung SDI, SK Innovation, Ecopro, and POSCO FUTURE M.
In addition, it increased the proportion of Samsung Biologics, Celltrion, and PharmaResearch while newly including SK Biopharm, thereby giving weight to the bio sector.
Of course, Asset Plus Korea Leader Active has not always achieved excellent performance. From April to September last year, its revenue was weak compared to the underlying index. In particular, during the tariff shock from the Donald Trump administration in April this year, it defended better than the underlying index, whereas during the 'yen carry trade liquidation' shock in August last year, it experienced a larger drop. The ETF's total expense ratio is also relatively high at 0.975%.
If Asset Plus Korea Leader Active fails to continue to achieve excess revenue and meet correlation criteria by November, it will be subject to delisting review under regulations. However, since this regulation is meant to weed out ETFs that underperform relative to the underlying index, Asset Plus Asset Management plans to continue discussions with the Korea Exchange.
Asset Plus Asset Management noted, "We plan to actively include stocks with high investment attractiveness among those included in the underlying index to increase the correlation coefficient."