Mirae Asset Global Investments' "TIGER Semiconductor TOP10" ETF is under fire for breaking index calculation rules and forcefully changing its portfolio. As it fell behind in the competition for returns and fund inflows with other semiconductor ETFs, critics say it could not wait for the October regular rebalancing and used a trick that exploited a loophole in the rules.
According to the financial investment industry on the 9th, the TIGER Semiconductor TOP10 ETF added three new stocks—SK Square, Jusung Engineering and ISU Petasys—on the 2nd, about three months ahead of the regular rebalancing, and removed HPSP, ISC and Soulbrain.
Industry watchers say the stock changes stem from an arbitrary interpretation of the methodology by FnGuide, the index provider. The "FnGuide Semiconductor TOP10 Index," tracked by the TIGER Semiconductor TOP10 ETF, has its regular rebalancing dates in April and October each year. While there is an "ad hoc weight adjustment" when a specific stock's weight exceeds 30%, the detailed rules draw a line by stating that "there is no change to the constituent stocks."
When it is not a regular rebalancing, a legitimate "special change" reason is required to alter the constituents, but the latest changes did not meet that threshold. Even in FnGuide's notices, there was no special change guidance or mention related to these constituent changes.
In the industry's view, judging that time was tight to wait until the October regular rebalancing, they exploited a gap—namely, the lack of specific rules on sector classification changes within the index methodology—and resorted to a workaround. Coordinating with FnGuide, the index provider, they first changed the index's semiconductor sector classification itself and then used that as justification to immediately revise the ETF portfolio.
Failing to adhere to the timing for reflecting the rebalancing has also fueled the procedural violation controversy. Under the methodology, an ad hoc weight adjustment, once conditions are met, must be reflected "three business days after the month-end business day (T+3)." But the date applied to the actual portfolio was July 2, confirmed as being front-run by one day at "T+2," earlier than the rule.
Mirae Asset Global Investments argued procedural legitimacy, saying it was a normal response to FnGuide, the index provider, changing the sector classification.
A Mirae Asset Global Investments official said, "Although it was not a regular rebalancing date, the index provider changed the semiconductor sector classification, so the TIGER Semiconductor TOP10 ETF that tracks it proceeded with new inclusions and exclusions," adding, "As for the timing of reflecting the changes, this was not an ad hoc change due to an individual stock weight exceeding the limit, so there is no issue with implementing it two business days after the month-end business day."
However, the financial investment industry strongly criticized Mirae Asset, saying it broke the minimum rules of ETF management. With competition among semiconductor ETFs having intensified recently, they view the move as a forced portfolio change aimed at overcoming weak fund inflows.
Indeed, in recent returns, "TIGER Semiconductor TOP10" posted the lowest performance among major domestic semiconductor ETFs used for comparison. Based on the most recent one-month return, it was -16.51%, the largest negative return.
Compared with rival products such as "KODEX AI Semiconductor TOP2 Plus" (-3.69%), "HANARO Fn K-Semiconductor" (-4.43%) and "SOL AI Semiconductor TOP2 Plus" (-5.85%), it suffered losses three to four times larger.
Even over the most recent three months, it reached only 31.63%, clearly lagging competitors such as "SOL AI Semiconductor TOP2 Plus" (115.13%), "HANARO Fn K-Semiconductor" (98.29%) and "KODEX AI Semiconductor TOP2 Plus" (80.39%), which posted triple-digit returns.
The weak returns of TIGER Semiconductor TOP10 led individual investors to turn away. It was the only major semiconductor ETF to see a large net outflow of individual funds over the past month. Over the past month, individual investors recorded a net sell of 195.4 billion won.
During the same period, it moved in the exact opposite direction of "SOL AI Semiconductor TOP2 Plus," which saw 823.3 billion won in individual funds flow in, and "KODEX AI Semiconductor TOP2 Plus," which attracted 663.2 billion won.
On a three-month basis as well, net inflows into TIGER Semiconductor TOP10 were only 126.3 billion won, falling short compared with SOL products, which drew 3.3722 trillion won over the same period, and KODEX products, which attracted 1.121 trillion won.
An official at a domestic asset management company said, "Opaque changes that violate prescribed procedures can undermine investor confidence in ETF products and the capital market as a whole."
An exchange official said, "Reorganizing sector changes within an index or the industry classification system is up to the index provider," but added, "We will review whether there were any violations of the rules by the asset manager, such as changes to index constituents, in connection with this matter."