Despite the Direct Investment Boom, EMP Funds Are Growing Rapidly

4.4 Trillion KRW in 44 Allocations... Sixfold Increase Compared to 2017

[Asia Economy Reporter Minji Lee] Despite the direct stock investment craze among individual investors, funds have continuously flowed into EMP (ETF Managed Portfolio) funds, which allocate more than 50% of their portfolios to ETFs (Exchange-Traded Funds) or ETNs (Exchange-Traded Notes).

According to financial information provider FnGuide on the 5th, as of the 4th, the total assets under management of 44 EMP funds amounted to 703.4 billion KRW. This is about six times the amount compared to 2017 (around 120 billion KRW), when major securities firms began actively launching EMP funds. Although public fund inflows significantly decreased last year due to increased direct investments by individuals, the growth trend of EMP funds continued.

It is interpreted that continuous inflows occurred as asset management companies launched various new products to meet customers' needs for asset allocation. Since last year, a total of 17 new funds have been launched. This number far exceeds the 7 funds in 2019, 9 in 2018, and 3 in 2017. To facilitate asset allocation, including overseas assets is necessary, and compared to general active stock funds, ETFs have the advantage of stable investment in various assets and higher trading efficiency. Additionally, the ability to invest in a wider range of assets at a lower cost than general active funds seems to have influenced this trend.

EMP funds also show stable performance. The average 1-year return of EMP funds is 14.81%, recording double digits, and the 6-month return is around 5.70%. Among individual funds, the highest return was recorded by the ‘KB Dynamic 4th Industry EMP’ fund, which achieved about 64% over one year. Major holdings include ‘Invesco WilderHill Clean Energy ETF’ focusing on renewable energy companies, ‘ARK WEB XO ETF’, ‘ISHARES PHLX SEMICONDUCTOR ETF’ investing in U.S.-listed semiconductor companies, and ‘ARK INNOVATION ETF’ investing in innovative companies. Other funds with high returns include ‘Mirae Asset Global Core Tech EMP (57%)’, ‘Mirae Asset EMP Balance Style (53.6%)’, and ‘Korea Investment Global Good Company ESG (30.5%)’.

Amid increased market volatility following the COVID-19 pandemic, it is expected that more investors will turn to diversified investments this year. Furthermore, as asset management companies incorporate ESG sectors, which attract significant investor interest, to pursue excess returns, capital inflows are anticipated. Last year, ‘NH-Amundi New Paradigm Asset Allocation EMP’ and ‘Hanwha Global Megatrend EMP’ pursued excess returns by including ETFs focused on key growth themes such as global eco-friendly sectors, electric vehicles, and 5G. An industry insider explained, “This trend will not end as a short-term fad. Major countries’ fiscal investments are moving toward ESG, and especially the importance of the E (environment) has increased due to the implementation of the Paris Climate Agreement, so related EMP funds will be competitively launched.”