As the performance gap between large caps and small and mid caps has widened recently in the stock market, theme ETFs that concentrate on a handful of large caps are increasing even among exchange-traded funds (ETFs) that aim for diversification.
According to the financial investment industry and IBK Securities on the 7th, of the 12 ETFs newly listed on the market in Oct., six were "theme-concentrated ETFs" that invest heavily in a few large-cap stocks based on a specific theme.
Representative products include ▲ TIGER Korea AI Power Equipment TOP3 Plus ▲ RISE Global Game Tech TOP3 Plus ▲ RISE U.S. High Dividend Dow Jones TOP10 ▲ SOL U.S. Next Tech TOP10 Active ▲ HANARO securities High Dividend TOP3 Plus ▲ KODEX K-Shipbuilding TOP10
As their names suggest, these products are structured to focus on top names such as "Top 3" and "TOP10" within a theme. For example, the "TIGER Korea AI Power Equipment TOP3 Plus" ETF invests more than 70% of total assets in three stocks: HD Hyundai Electric, Hyosung Heavy Industries, and LS ELECTRIC.
The "HANARO securities High Dividend TOP3 Plus" ETF likewise allocates more than 60% to three stocks—Korea Investment Holdings, Mirae Asset Securities, and NH Investment & Securities—while "KODEX K-Shipbuilding TOP10" concentrates about 85% in four stocks including Hanwha Ocean and Samsung Heavy Industries, following a similar structure.
This trend is driven by the ability to target both investment returns and marketing effects in a rally led by large caps. In fact, according to the Korea Exchange (KRX), the KOSPI large-cap index rose 74.5% this year through the 6th, far outpacing mid caps (40.2%) and small caps (16.7%).
However, there are concerns that excessive concentration in a few names could increase risk. Kim In-sik, an analyst at IBK Securities, said, "As major managers have introduced structures concentrating on a few names such as 'Top 3' and 'TOP10,' the tilt toward large caps in the market has strengthened, and short-term momentum (upside potential) has also been amplified."
He added, "The spread of compressed theme products entails exposure to volatility risk, and performance dispersion can widen depending on individual events affecting the constituents."