The KOSDAQ active exchange-traded funds (ETFs) that drew investors' high hopes at debut have plunged into negative territory after taking a direct hit from a string of domestic and external headwinds, including recent geopolitical risks and the Sam Chun Dang Pharm shock. To defend against returns with no apparent bottom, asset managers are going all-in on portfolio rebalancing. In particular, one product from Timefolio Asset Management has been responding nimbly to extreme volatility, swapping out its top-weighted holding six times recently.
As of the 20th, the top-weighted stock in the TIME KOSDAQ Active ETF from Timefolio Asset Management is VITZRO CELL. VITZRO CELL produces primary lithium batteries and mainly supplies products to the military and industrial sectors.
In the case of the TIME KOSDAQ Active ETF, the No. 1 weighted stock within the ETF changed six times over 29 trading days after listing. For the four trading days immediately after listing, EcoPro held the top weight, but it then shifted in order to ABL Bio, Sam Chun Dang Pharm, ABL Bio again, ISC, SILICON2, and VITZRO CELL.
That contrasts with the KoAct KOSDAQ Active ETF from Samsung Active Asset Management, which listed on the same day. On the listing day, on the 10th of last month, Qurient held the top weight for just one day, and since then Sungho Electronics has consistently maintained the No. 1 position.
Timefolio Asset Management initially built its portfolio around large-cap stocks to minimize market shocks at listing, but is seen to have later attempted to rotate leadership into biotech. More recently, it has been widening its focus across the board to semiconductor parts and cosmetics material corporations to navigate the volatile market.
A Timefolio Asset Management official said, "Recently, we are considering leading stocks centered on corporations with solid earnings and on materials, parts, and equipment corporations."
KOSDAQ active ETFs drew investors' attention at listing but have struggled to beat the KOSDAQ index. From the 10th of last month to the day, the KOSDAQ index rose 3.27%, but these products' returns fell instead.
For the KoAct KOSDAQ Active ETF, returns were in the 1% to 2% range early after listing, but on the 7th returns fell to -17.95%. However, after successfully trimming losses, returns had recovered to -4.61% as of the day.
For the TIME KOSDAQ Active ETF, returns have remained negative since listing. Likewise, after recording a trough of -19.24% on the 7th, returns have been gradually improving, but it still struggled to rebound, logging -11.68% on the day.
The problem is that frequent rebalancing to protect returns can backfire. If holdings are switched too often, trading costs rise, which are passed through directly to investors as other expenses. An asset management industry official said, "If rebalancing improves returns, the occurrence of fees or expenses is not a big issue, but if trading is repeated excessively, it can ultimately hurt fund performance."