As asset managers rush to roll out exchange-traded funds (ETFs) with similar structures, competition is intensifying. In particular, as bond-mix 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 for half of its assets, with the remaining 50% allocated to high-quality domestic bonds such as Treasury bonds.
Earlier, KB Asset Management listed the similarly structured "RISE Samsung Electronics SK hynix Bond Mix 50" ETF on Feb. 26. Both products effectively take the same investment strategy as bond-mix ETFs that combine large-cap semiconductor stocks with bonds.
Im 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 came out first."
Kiwoom Asset Management has also joined the fray. Kiwoom Asset Management completed the product code registration for the "KIWOOM Samsung Electronics & SK hynix Bond Mix 50" ETF on the 6th and is set to list it 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 effectively the same structure in that the "semiconductor top two" weighting is set 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 competing by touting low fees. 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 use right for original products, to reduce ETF product imitation. However, the only case protected under the system was Samsung Securities' "Samsung KRX Gold Spot ETN," and since the system was revised in Feb. 2024, not a single asset manager has applied.
The exchange explained that given the recent ETF market's features, with a variety of themes emerging, there are practical difficulties in operating the system.
A Korea Exchange (KRX) official said, "Because Samsung Electronics has a large market capitalization, even if an ETF is built around another theme, once Samsung Electronics is included, the structure can end up being the same," adding, "From the managers' perspective, they may judge that developing products with diverse themes has little practical benefit."
The problem is that after similar ETFs are launched en masse around the same time, investors can be hurt as unpopular 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 are not smooth, spreads between bid and ask prices widen, making it hard to trade at desired prices, or the premium/discount widens, which can confuse investors."
An exchange official also said, "We are reviewing ways to indirectly resolve the issue of overlapping listings, such as adjusting entry barriers for the ETF market or introducing new systems," adding, "We will make improvements so that investors do not repeatedly feel fatigued."