"-79.49%." This is the year-to-date return of the KIWOOM200 Futures Inverse 2X exchange-traded fund (ETF), which ranks among the worst-performing products this year. An investor who put in 10 million won would be left with only about 2 million won. As a product that bets twice on market declines, it fell more sharply than inverse ETFs that simply track prices in reverse. This phenomenon is not limited to a single product. According to ETF Check, the top 10 worst-performing products this year are dominated by double-inverse and inverse ETFs. This reaffirms that leveraged and inverse products are a "double-edged sword" that can maximize returns while also amplifying losses, depending on market conditions.
This side effect lies behind the lingering concerns over single-stock leveraged and inverse ETFs scheduled to list on the 22nd of this month. While the initial aim was to lure back domestic retail investment funds that had flowed overseas amid the high exchange rate, the industry is focusing more on the "ripple effects from domestic market volatility."
Based on prior reporting by this newspaper, a total of 16 single-stock leveraged and double-inverse ETFs tracking Samsung Electronics (005930.KS) and SK hynix (000660.KS) are expected to be launched. While Samsung Electronics and SK hynix are large-cap stocks, they have shown extreme volatility in the recent market, with daily gains of around 10%. When capital flows concentrate, single-stock leveraged and inverse ETFs can act as an "accelerator pedal" that amplifies volatility. Analysts note that ETF liquidity providers (LPs), whether in bull or bear markets, must chase-buy or sell related stocks (including futures) in large volumes to maintain their hedge ratios, inevitably adding to market turmoil.
In particular, there is concern that latecomers to stock investing — the so-called "FOMO (fear of missing out) crowd" — could use these products as a tool for maximizing short-term returns. "With stock prices rising more than 10% in a single day, even a 'product offering 15% annual returns' fails to satisfy investors," an executive in the securities industry said. "The perception that leveraged, inverse, and double-inverse ETFs are not long-term investment products has also become blurred."
Financial authorities, also wary of this point, have strengthened pre-investment education for investors, but experts commonly point out that this remains insufficient. Their call for multifaceted additional measures — such as enhanced separate monitoring during the first six months or year after product launch — deserves attention.
