Private New Deal Funds Featuring 'BBIG' Launch One After Another...Will They Lead to Success?

[Asia Economy Reporter Koh Hyung-kwang] The asset management industry is steadily launching products related to the government-led 'Korean New Deal' project. Since most of the New Deal-related sectors represented by BBIG (Battery, Bio, Internet, Game) are sectors receiving attention, the general view is that the mid- to long-term outlook is bright. However, there are expectations that the short-term supply and demand effect from the launch of New Deal funds will be limited as the stock prices of major stocks have already risen sharply.

According to the financial investment industry on the 16th, Samsung Active Asset Management launched the 'Samsung New Deal Korea Fund' yesterday, which focuses on two key investment points: 'Green' and 'Digital.' The 'Green' portfolio invests in companies that generate profits through eco-friendly product-related services, while the 'Digital' portfolio invests in companies possessing core technologies aligned with online trends. This fund does not involve tax benefits or government policy funds promoted by the government. It is a purely public offering equity fund launched by a private management company, and all included stocks are listed on the domestic securities market. Samsung Active Asset Management confidently promoted the fund's success by recommending subscription to President Moon Jae-in during the New Deal fund meeting held at the Blue House on the 3rd.

Mirae Asset Asset Management will launch the 'TIGER KRX BBIG K-New Deal,' an ETF tracking the 'K-New Deal' index, on the 7th of next month. It is the first ETF to track the Korea Exchange (KRX)'s 'KRX BBIG K-New Deal Index.' The index consists of 12 major stocks in the BBIG sectors. Mirae Asset Management has exclusive rights to use this index for the next three months, as it provided the idea for the index development. This allows Mirae Asset Management to expect a first-mover advantage in the K-New Deal ETF market.

NH-Amundi Asset Management's domestic equity ESG (Environmental, Social, Governance) investment product, 'NH-Amundi 100-Year Company Green Korea Fund,' launched on the 7th, can also be classified as a private New Deal fund. This fund focuses on eco-friendly industries such as electric vehicles and healthcare, which show noticeable improvement and growth potential within ESG.

Samsung Asset Management, the parent company of Samsung Active Asset Management, also plans to launch the 'FnGuide K-New Deal Index ETF' (tentative name). This ETF will track an index jointly developed by Samsung Asset Management and the financial information company FnGuide, including a total of 20 stocks with five from each of the four BBIG sectors. Other major asset management companies such as KB Asset Management are also reportedly considering launching related products.

As various New Deal investment products emerge one after another, the industry’s basic view is that these products can expect stable returns in the mid- to long-term by investing in Korea's representative growth sectors. This is because BBIG, the main investment target, not only covers Korea's representative growth stocks but also shows strong growth globally. Park So-yeon, a researcher at Korea Investment & Securities, explained, "The New Deal industries are sectors such as eco-friendly, secondary batteries, bio, internet, and games, which have become attractive not only domestically but also globally, so they deserve attention."

However, there are views that the immediate market impact will not be significant. Most of the major stocks in BBIG, which are the core investment targets such as LG Chem, Kakao, and NCSoft, are large-cap stocks that have already attracted considerable attention and surged in the market, so there will not be a noticeable supply and demand effect. Among the 12 stocks in the K-New Deal index, 10 exceed a market capitalization of 10 trillion won based on the previous day's closing price. Six of these are among the top 10 in KOSPI market capitalization. Researchers Kang Song-cheol and Choi Yoo-jun of Shinhan Financial Investment said, "Among ETFs listed this year, those that do not track representative indices such as KOSPI had a market capitalization of less than 30 billion won at the time of listing," and predicted, "Even if the K-New Deal index ETF is listed, its initial scale is unlikely to greatly exceed this."

Another limitation is the initial restriction on the use of the K-New Deal index developed by the Korea Exchange. According to industry practice, the Korea Exchange granted Mirae Asset Management exclusive rights to use this index for three months because it provided the idea for the index development. Therefore, until December, ETFs linked to the K-New Deal index can only be subscribed to through Mirae Asset Management. Since June 2018, the Korea Exchange has granted exclusive rights to securities firms or asset management companies that provided ideas and collaborated on index development. An industry insider expressed dissatisfaction, saying, "Although the New Deal index composition, which includes major BBIG stocks, is not original, the Korea Exchange granted exclusive rights to Mirae Asset Management."