The competition among asset managers to dominate the bio exchange-traded fund (ETF) market has intensified, but the results have been disappointing. A significant drop in common stocks with high weightings in bio shares has dragged down the overall performance of ETFs.
According to the Korea Exchange, there are currently nine ETFs that invest in domestic bio companies. Among them, two were newly listed this month. Korea Investment Trust Management and Midas Asset Management launched the 'ACE K Bio KOSDAQ Active ETF' and 'MIDAS Bio Healthcare Active ETF' on July 21 and July 28, respectively, targeting the bio ETF market.
Despite the new product launches, the performance of bio ETFs this month has been lackluster. The largest decline was recorded by the 'UNICORN K Bio Active,' which was listed in May. This month, it posted a return of -37.40%. Compared to its closing price on the first day of trading on May 12 (9,925 won), it has fallen by 52.19% as of today. Its total net assets have also decreased from approximately 9.9 billion won at the time of listing to about 5.7 billion won now. Passive ETFs have not escaped the downturn either, with 'TIGER KOSDAQ 150 Biotech' down -30.47% and 'KODEX Bio' down -24.93% this month.
Active ETFs have also been affected by the overall correction in the bio sector. The 'TIGER Technology Transfer Bio Active' recorded the largest drop at -31.68% this month. Following it, 'KoAct Bio Healthcare Active' and 'RISE Bio TOP10 Active' fell by -31.01% and -30.05%, respectively. Other funds like 'HANARO Bio Korea Active' (-25.91%) and 'TIME K Bio Active' (-24.39%) also showed weakness. Even active products, which adjust their holdings and weightings, could not escape the downward trend in bio stocks.
A key reason for the poor performance across these ETFs is the overlap in their holdings. Multiple bio ETFs contain similar stocks, leading to significant declines in some large-cap stocks affecting the overall returns of the products. Four stocks—Alteogen, ABL Bio, Ligand Chem Bio, and ST Pharm—are included in all eight domestic bio ETFs and have all seen declines this month. Notably, Ligand Chem Bio plummeted by -44.70%, while ABL Bio dropped -32.37%. ST Pharm and Alteogen also fell by -31.83% and -21.22%, respectively.
Experts suggest that waning expectations surrounding the bio sector have dampened investor sentiment. Kim Seung-min, a researcher at Mirae Asset Securities, stated, "At the beginning of the year, the government's target for KOSDAQ 3000 and the launch of active ETFs created a positive trend for the bio sector. However, recent adjustments in royalty expectations for Alteogen and delays in clinical trials for ABL Bio have diminished the investment appeal of the bio sector compared to other industries."
* This article has been translated by AI.
Copyright ⓒ Aju Press All rights reserved.