DS Asset Management Tops Active ETF Returns, Focuses on Reliable Profits

In a time of extreme market volatility, a notable player has emerged: DS Asset Management. Established 19 years ago, the firm surprised the investment community with its impressive returns just three months after entering the exchange-traded fund (ETF) market. Its active KOSDAQ ETF, launched in July, has achieved over 27% returns in three months, ranking first in the industry. The company also boasts exceptional research capabilities, having been selected consecutively as a primary asset manager for the National Growth Fund's large-scale sector.

What is the secret behind DS Asset Management's success? Hyun Sang-kyun, the firm's Vice President and Chief Investment Officer, attributes it to a rigorous, field-centered investment strategy that resists one-off narratives. In an interview with Aju Economy on November 3, he stated, "We avoid simple thematic products and focus on investing in growth industries that are recognized by the market and transitioning to mass production, specifically in the 2.5-stage growth phase, to ensure reliable profits. This is the core of our investment philosophy."

Hyun explained the factors that have allowed DS Asset Management to create a stir in the KOSDAQ active ETF market. He noted that the firm categorizes the development of growth industries into three major stages: the conceptual growth stage, where only ideas exist at the lab level; the cognitive growth stage, where pilot factories are established and market reactions are tested; and the maturity stage, where mass production begins.

He pointed out, "Many simple thematic products available in the market belong to the first stage, the conceptual phase. During this time, stock prices can fluctuate wildly based solely on narrative issues, making stock selection very challenging and causing significant difficulties for investors."

Hyun emphasized that DS Asset Management aims to operate in the '2.5 stage' between the cognitive and maturity phases, where companies begin to solidify industry profitability and where thorough corporate exploration can yield tangible results.

Hyun assessed that the AI industry, which has seen explosive growth since the emergence of ChatGPT in 2022, is also transitioning into the 2.5 stage and the early maturity phase. He noted that after the initial focus on large language models (LLMs), the trend has shifted to Agentic AI, with Physical AI expected to be the next key growth driver.

He stated, "In the Physical AI era, fields such as humanoid robots, industrial machinery, and defense-related industries will enter the early maturity stage, where they can concretely realize industrial profitability. The volume of data used, which has been flat, will increase exponentially, leading to a surge in demand for data computing power."

Hyun highlighted the unique value of South Korea's manufacturing database and production capabilities amid the competitive landscape dominated by the U.S. and China in AI frontier models. He remarked, "There are many areas where South Korea can independently operate within the value chain under the U.S.-China rivalry. The government's growth drivers and the National Growth Fund are also catalysts created in this context, aligning with DS Asset Management's active ETF strategy."

Despite the clear long-term upward trajectory of the AI industry, Hyun identified the recent extreme fluctuations in the stock market as stemming from a power struggle between Silicon Valley's tech dominance and Wall Street's financial power. He analyzed, "The tech power led by Nvidia is confident in the upward direction of AI based on tremendous financial performance and market capitalization, but the volatility arising from non-linear growth processes is being exploited by Wall Street's financial power to shake the tech sector with capital shortage issues."

He explained that the structural characteristics of the domestic market, combined with the effects of global financial power struggles, have amplified volatility. In South Korea, the concentration of memory stocks has further exacerbated the impact of volatility.

However, Hyun predicted that this market turbulence would not last long. He stated, "Once the return on invested capital (ROIC) and profit structure of the AI industry become visible, the financial power's ability to shake the market will diminish. This moment is not far off, and by early next year, we can expect significant results centered around the AI value chain, as if nothing had happened."

As market volatility increases, Hyun believes that meticulous stock analysis and management capabilities that are not swayed by short-term issues become even more crucial. The launch of DS Asset Management's KOSDAQ active ETF, with a management fee of around 1%, garnered attention for its confidence in research, contrasting sharply with the recent fee-cutting competition among passive ETFs.

Hyun stated, "Unlike passive ETFs that replicate indices based on market capitalization ratios, active ETFs incur higher operational costs due to in-depth macro and industry analysis conducted by internal analysts and managers. Rather than focusing on fee wars, competing through responsible research and management quality is the essence of appropriate fees and the best path for our clients."

Finally, he offered advice to individual investors struggling with market volatility. Hyun cautioned, "Investing based solely on YouTube or media issues without professional knowledge and making excessive assumptions about the future of industries you are not involved in is risky. Instead of halting investments due to market volatility, it is best to continue investing through capable management firms like active ETFs using retirement or personal pension funds to enhance long-term expected returns."

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