Baek Jae-kyu, CEO of Korea Investment Trust Management, urged investors to stop investing in single-stock leverage products.
On July 20, Baek expressed his concerns on Facebook, stating, "As the head of a firm managing individual stock leverage exchange-traded funds (ETFs), I apologize for saying this."
He noted, "No one could have predicted such high volatility. I expect to face criticism for saying this now, but I hope you will consider halting your investments."
Baek emphasized, "The conclusion of this message is to avoid investing in individual stock leverage and inverse double ETFs."
He further explained, "Even if the underlying asset returns to its original price over time, the ETF price may not recover. Especially with the current high volatility of the underlying asset, the structure leads to daily losses."
Baek included a chart showing the price trends of SK Hynix's underlying asset and the corresponding leverage and inverse ETFs. He clarified, "The table below is based on actual cases and focuses on the ETFs with the highest trading volume and assets under management (AUM)."
According to the data, SK Hynix's stock price fell from 2,243,000 won on May 27 to 1,842,000 won on July 16, a decline of 17.9%.
During the same period, the largest single-stock leverage ETF for SK Hynix recorded a loss of 47.5%. While the theoretical loss based on the stock's decline would be 35.8%, the actual loss exceeded this by 11.7 percentage points.
In the case of the single-stock inverse ETF for SK Hynix, it theoretically should have recorded a 35.8% gain due to the stock's decline, but it actually incurred a loss of 31.1%. The discrepancy between the theoretical return and actual performance was 66.9 percentage points.
Korea Investment Trust Management operates the 'ACE Samsung Electronics Single-Stock Leverage' and 'ACE SK Hynix Single-Stock Leverage' products.
* This article has been translated by AI.
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