Asset management companies are ambitiously launching various thematic ETFs targeting the niche of the exchange-traded fund (ETF) market dominated by Samsung and Mirae Asset, but many of these ETFs are facing imminent delisting. The interpretation suggests that the brief lifespan of trend-based ETFs, combined with an industry atmosphere where similar products are quickly released once a thematic product appears, contributes to the crisis of thematic ETFs.
According to the Korea Exchange on the 23rd, NH-Amundi Asset Management's 'HANARO U.S. Metaverse iSelect', KB Asset Management's 'RISE Global Metaverse ETF', and Shinhan Asset Management's 'SOL Korea Type Global Platform & Metaverse Active', which were launched in succession during the metaverse craze from 2021 to 2022, have all been expelled from the market this year.
These ETFs once recorded decent revenue by investing in major big tech corporations both domestically and internationally. However, as investor interest in the metaverse theme rapidly cooled, their net worth significantly declined.
Asset management companies can decide to delist an ETF if, one year after its establishment, the original amount set and the net worth are maintained below 5 billion won for one month. At this point, delisting is not mandatory, but if the burden of management expenses is greater, delisting becomes a better choice for the management company.
The 'TIMEFOLIO Global Anti-Aging Bio Active' ETF launched in July last year by Timefolio Asset Management is also nearing delisting criteria with a net worth of 4.6 billion won and an original trust amount of 5.5 billion won. The 'RISE Global Obesity Industry TOP 2', which invested nearly 60% in Eli Lilly and Novo Nordisk by jumping on the obesity treatment trend, currently has a net worth of just 5.1 billion won.
An industry insider noted, "The thematic ETFs, being released around specific industries or issues, possess weaknesses that make them easily neglected once trends change," and added, "As trendy themes change so rapidly, it seems the lifespan of thematic ETFs is shortening. "
Analysis suggests that once a specific thematic ETF is introduced, similar products flood the market, hastening the delisting crisis. This causes the trading volume to be inevitably dispersed, with the distributed trading volume often concentrating on top ETF products such as those from Samsung and Mirae Asset. For investors, it becomes common to select large ETFs with concentrated trading volumes for smoother transactions.
Taking thematic ETFs in obesity treatment as an example, the net worths of Mirae Asset Global Investments' 'TIGER Global Obesity Treatment TOP 2 PLUS' and Samsung Asset Management's 'KODEX Global Obesity Treatment TOP 2 PLUS' are 80 billion won and 60 billion won, respectively.
A representative from a small management firm said, "Even if we swiftly release thematic ETFs that align with investment trends, funds frequently flow into large firm products with high liquidity," adding, "Yet, we cannot refrain from releasing products that everyone else is launching."
Another industry insider stated, "Large firms have the capacity to launch various thematic ETFs in line with trends and then wait for the market trend to return," while on the other hand, small and medium-sized firms often decide on delisting when trading volume decreases due to expense burdens.
Authorities expressed their stance regarding natural competition among businesses. A Korea Exchange representative said, "For items with low liquidity, the bid-ask spread inevitably widens, increasing the likelihood that investors will buy and sell products at higher prices," and added, "From this perspective, swiftly delisting ETFs with dried-up trading volumes is better for investor protection."
A representative from the exchange stated, "The successive launch of similar products is a natural flow of the market," and added, "This is a matter of supervision and management, and not something that requires regulation of the issuance itself."