Three target date fund (TDF) exchange-traded funds (ETFs) managed by Korea Investment Trust Management are at risk of delisting due to significant performance discrepancies from their benchmark indices. These funds are designed for long-term asset management until retirement.
According to the financial investment industry on June 22, the 'ACE TDF2030 Active Qualified', 'ACE TDF2050 Active Qualified', and 'ACE TDF Long-Term Asset Allocation Active' ETFs have all maintained a correlation coefficient below the required 0.7 for over two months. As a result, these ETFs are currently unavailable for purchase in retirement accounts.
Exchange regulations state that if an ETF's daily net asset value (NAV) fluctuation rate has a correlation coefficient with its benchmark of less than 0.7 for three consecutive months, it may be subject to delisting. As of June 19, the ACE TDF2030 Active Qualified ETF recorded a correlation coefficient of 0.63. The fund has been below the 0.7 threshold since April 2. The other two TDF ETFs have also reported similar deficiencies. If this situation persists until July 3, it will trigger delisting procedures for these funds.
The total net asset value of the three funds is approximately 92.5 billion won, with the ACE TDF2050 Active Qualified at about 62.5 billion won, the ACE TDF2030 Active Qualified at around 16.2 billion won, and the ACE TDF Long-Term Asset Allocation Active at about 13.9 billion won.
The correlation coefficient indicates how closely an ETF's NAV follows its benchmark index, with a value closer to 1 indicating a stronger alignment. This is distinct from the deviation rate between the market price of the ETF and its NAV.
However, even if delisting occurs, investors will not lose their capital. The management company will announce the delisting decision, allowing investors to sell their ETFs on the market before the delisting takes effect. If investors hold onto their shares until delisting, they will receive an amount based on the NAV minus related costs as of the delisting date. TDFs are typically long-term investment products designed to manage assets until retirement, and failing to meet listing standards can create uncertainty for investors.
A representative from Korea Investment Trust Management stated, "Since the beginning of the year, we have increased the domestic stock allocation in response to the rise in the domestic stock market, which has led to the performance gap with the benchmark. We are currently managing the funds to closely follow the benchmark to meet the correlation coefficient requirements."
* This article has been translated by AI.
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