This year, the popularity of bond-mixed exchange-traded funds (ETFs) has surged in the market. Notably, KB Asset Management's 'RISE Samsung Electronics SK Hynix Bond Mixed 50,' launched in February, surpassed 4 trillion won in net assets within just four months, becoming the top bond-mixed ETF in South Korea.
In a recent interview with AJU Economy, Yuk Dong-hwi, head of ETF product marketing at KB Asset Management, emphasized that in ETF investing, the focus should be on 'how to structure assets' rather than 'what to buy.' He advised investors to first determine their asset goals for 5 to 10 years down the line and then select ETFs that align with those objectives, rather than simply chasing the highest returns.
Investor Mindset Shifts After July Market Drop: ETFs as Asset Management Tools
Yuk advised individual investors looking to start ETF investments that thinking about buying the ETF with the highest potential returns can complicate their investment strategy. Instead, he suggested that they should consider how much they want their investments to grow over the next 5 to 10 years and design their investment structure accordingly.
By setting clear goals, investors can reverse-engineer their investment choices. For instance, if an investor currently has 100 and aims for it to grow to 120, the target increase is 20. Choosing ETFs that align with this goal would change their investment approach.
This shift in investment strategy is also reflected in the recent ETF market trends. Previously, investors typically focused on high-yield themes or sectors, but there is now a growing number of investors using ETFs as tools for asset management.
Yuk noted that the stock market's sharp decline in July accelerated this change in investor perception. More investors are considering factors like representative indices, dividends, and asset allocation, rather than concentrating solely on specific themes like artificial intelligence (AI) and semiconductors. He observed, "Since assets are not managed for just one year, it seems that long-term investors are increasing as market fluctuations occur."
The success of bond-mixed ETFs this year is also seen as a result of heightened interest in asset allocation. By combining stocks and bonds, these ETFs provide opportunities for stock appreciation while reducing volatility, which has increased demand among pension investors. KB Asset Management is developing a diverse range of products, including bond-mixed ETFs, monthly dividend ETFs, and those based on representative indices. Yuk emphasized that the fundamental principle remains prioritizing the investor.
ETF Market Expected to Expand: Increased Use by Pensions and Institutions
This transformation is expected to broaden the scope of the ETF market. Yuk anticipates significant growth potential in the ETF sector, as investors begin to view ETFs not just as vehicles for one-time profits but as essential tools for asset management. There is also potential for increased ETF utilization among pensions and institutional investors.
He pointed out that many investors still choose principal-protected products like savings accounts in defined contribution (DC) retirement plans and individual retirement plans (IRPs). If the use of ETFs expands among defined benefit (DB) funds and institutional investors like pension funds and mutual aid associations, the market size could grow significantly.
Yuk stated, "If companies aim for a 5% to 7% return annually, ETFs will be the investment vehicle of choice. Given that pension funds and other institutional investors are increasingly directing their funds toward ETFs, it’s plausible that the market could quickly reach 1,000 trillion won, not just 500 trillion won."
As the ETF market continues to grow, Yuk identified AI as a key investment theme for the second half of the year. He advised investors to look beyond the name 'AI' and focus on sectors experiencing supply shortages or bottlenecks as the industry expands.
Yuk remarked, "If you ask what the keyword for the second half is, it’s still AI. As the AI industry develops, sectors facing shortages, or bottlenecks, tend to see stock price increases. For instance, memory shortages have driven up prices, and the same could apply to graphics processing units (GPUs) and possibly central processing units (CPUs). We are planning upcoming product launches while considering what products investors need right now."
KB Asset Management's recent launch of the 'RISE Global AI NAND Memory Semiconductor,' which focuses on the global NAND memory value chain, aligns with this strategy. The firm anticipates that the demand for NAND flash memory will structurally increase as the volume of data processed by AI grows rapidly, investing in related stocks listed in South Korea, the U.S., and Japan.
* This article has been translated by AI.
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