As asset managers rush to roll out exchange-traded funds (ETFs) with similar structures, competition is intensifying. In particular, as bond-mixed ETFs that concentrate on Samsung Electronics and SK hynix are launched one after another, critics say product differentiation is weak and only fuels a "herding effect" in the stock market.
According to the financial investment industry on the 11th, Samsung Asset Management newly listed the "KODEX Samsung Electronics SK hynix Bond Mix 50" ETF on the 7th. The product invests up to 25% each in Samsung Electronics and SK hynix, totaling half of its assets, with the remaining 50% allocated to high-quality domestic bonds such as Treasurys.
Earlier, KB Asset Management listed a similar "RISE Samsung Electronics SK hynix Bond Mix 50" ETF on Feb. 26. Both products combine large-cap semiconductor stocks and bonds as bond-mixed ETFs, effectively employing the same investment strategy.
Lim Tae-hyeok, head of ETF management at Samsung Asset Management, said, "Samsung Electronics SK hynix bond mix was prepared as a follow-up product after the existing 'KODEX Samsung Electronics Bond Mix' gained popularity," adding, "The launch timing simply overlapped, and considering it takes about three months from product development to listing, it is hard to say we copied the product that launched first."
Kiwoom Asset Management has also joined the fray. Kiwoom Asset Management completed registration of the product code for the "KIWOOM Samsung Electronics & SK hynix Bond Mix 50" ETF on the 6th and is set to list on the 21st of this month. Hana Asset Management will also launch the "1Q K-Semiconductor TOP2 Bond Mix 50" on the 14th. The product names are slightly different, but they are essentially the same structure in that they set the weight of the "semiconductor top two" at 50%.
A Kiwoom Asset Management official said, "The structure of investing 25% each in Samsung Electronics and SK hynix and putting the rest into bonds is the same," adding, "We will add differentiated points to make it suitable for long-term investment compared with similar products from other managers."
As ETFs with similar structures are launched in quick succession, some managers are turning to low fees to compete. KB Asset Management and Hana Asset Management have adopted a low-fee strategy with a total annual fee of 0.01%. By contrast, Samsung Asset Management and Kiwoom Asset Management, though later entrants, proposed a total fee of 0.07%, which is 0.06 percentage point (P) higher than competitors.
Earlier, the Korea Exchange (KRX) introduced and has operated since 2019 the "exchange-traded product (ETP) new product protection system," which grants a six-month exclusive right of use to original products to reduce ETF product imitation. However, the only case protected under this system is Samsung Securities' "Samsung KRX Gold Spot ETN," and since the system overhaul in Feb. 2024, not a single asset manager has applied.
The exchange explained that, considering the recent ETF market's feature of a wide range of emerging themes, there are practical difficulties in operating the system.
A Korea Exchange (KRX) official said, "Because Samsung Electronics has a large market cap, even if an ETF is built around another theme, once Samsung Electronics is included, the structure can end up effectively the same," adding, "From the managers' perspective, they may judge that developing products with a variety of themes has little practical benefit."
The problem is that after similar ETFs are launched en masse around the same time, investors can be harmed as less popular products are effectively left unattended.
Lee Hyo-seop, senior research fellow at the Korea Capital Market Institute, said, "It is easy to enter the ETF market, but there are areas where poor-quality listings are not well managed," adding, "When a product loses popularity, supply and demand do not function smoothly, widening the spread between bid and ask prices and making it difficult to trade at the desired price, or a growing premium/discount can leave investors confused."
An exchange official also said, "We are closely reviewing overlaps among ETF products during the listing examination process," adding, "We will continue to improve so that investors do not repeatedly feel fatigued."