Bae Jae-kyu, CEO of Korea Investment Trust Management, reiterated his critical stance on single-stock leverage products amid ongoing controversy over the financial authorities' bypassing of certain asset management firms. Despite being the head of a firm that manages related products, he urged investors to exercise caution and stated, "They should be phased out naturally rather than through delisting."
On July 30, Bae expressed on his Facebook page that the issue of single-stock leverage should not solely rely on investor requests. He emphasized, "It should be phased out naturally, not through delisting," adding that it is feasible with the support of asset management firms and some regulatory assistance. He further stressed, "Not engaging in these products is the best course of action."
Bae explained that simply predicting market direction is insufficient for leverage and inverse products. He noted that increased volatility and repeated fluctuations can rapidly erode the value of these products due to daily rebalancing and compounding effects.
He also advised investors, particularly those anxious due to recent market declines, to adhere to long-term investment principles rather than focusing on short-term price movements. "Instead of trying to predict short-term prices, one should assess whether the direction of the industry they invested in remains correct," he said. "If the investment direction is right and time is on your side, sometimes doing nothing can be the best response."
Bae pointed out that while semiconductors are essential in the AI era, memory semiconductors remain cyclical. He recommended investing in the entire semiconductor ecosystem, including design, memory, foundry, and equipment, rather than focusing on a single memory company.
Bae's renewed message has gained attention as Korea Investment Trust Management, ranked among the top three or four asset management firms, was notably excluded from discussions by financial authorities regarding measures for single-stock leverage products. On July 22, the Financial Services Commission convened ETF heads from Samsung Asset Management, Mirae Asset Global Investments, and KB Asset Management to discuss these measures.
On July 28, a meeting chaired by Financial Services Commission Chairman Lee Ok-won included representatives from the exchange, the Korea Financial Investment Association, asset management firms, and securities companies, but Korea Investment Trust Management was again left out. The meeting included Shinhan Asset Management, which ranks fifth in ETF market share, alongside Samsung, Mirae Asset, and KB Asset Management.
This repeated bypassing by financial authorities is believed to be influenced by Bae's public criticism of single-stock leverage products. Earlier, on July 20, Bae publicly called for a halt to investments in these products, expressing regret as the head of a firm managing individual stock leverage ETFs. He stated, "No one could have predicted such high volatility. I hope you will stop investing even now."
Bae provided actual examples to support his claims. According to data he shared, the stock price of SK Hynix fell from 2,243,000 won on May 27 to 1,842,000 won on July 16, a decline of 17.9%. In contrast, the single-stock leverage product for SK Hynix, which has the largest trading volume and assets under management, recorded a loss of 47.5% during the same period. The theoretical loss, based on the simple application of the original decline, was 35.8%, but the actual loss exceeded this by 11.7 percentage points.
The single-stock inverse product for SK Hynix also theoretically should have yielded a profit of 35.8% based on the original decline, but it instead recorded a loss of 31.1%, indicating a discrepancy of 66.9 percentage points between theoretical returns and actual performance.
Korea Investment Trust Management currently manages 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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