DS Asset Management has entered the market with a KOSDAQ active exchange-traded fund (ETF) as its first ETF product. The firm's strategy is to build a "real active ETF" that invests based on companies' fundamentals and growth potential rather than market capitalization, drawing on the corporate analysis capabilities accumulated through unlisted investments.
DS Asset Management held a press conference in Yeouido, Seoul, on the 10th to mark its entry into the ETF market and announced that it will list the "DS KOSDAQ Active ETF" on the 14th of this month. The product is an active offering that selects and concentrates investment in leading stocks within structurally growing industries in the KOSDAQ market.
"To differentiate ourselves from existing active ETFs, we mobilized all of DS Asset Management's in-house capabilities, including our research strengths and our ability to identify leading stocks, which we do best," said Kim Sung-hoon, CEO of DS Asset Management. "We will work to make this an excellent option for investors."
At the conference, DS Asset Management presented "Starting Real Active" as the slogan for its ETF brand. The firm's ambition is not merely to construct a portfolio that differs from an index, but to select stocks based on research, respond flexibly to market changes, and continuously explain the rationale behind its management decisions to investors.
"Allocating assets according to market capitalization weightings, regardless of a company's fundamental value, does not sufficiently reflect a company's intrinsic value," said Chief Investment Officer (CIO) Hyun Sang-kyun. "Closely analyzing corporate value and sensitively reflecting changes in fundamentals over time is DS Asset Management's strength."
DS Asset Management cited the fact that KOSDAQ is the market where its corporate analysis capabilities can be best demonstrated as the reason for choosing it for its first ETF product. The strategy is to select companies with high growth potential by utilizing its corporate database and experience of discovering early-stage unlisted companies and investing in them through and beyond their listings, since the company's founding in 2008.
"KOSDAQ is not a market that doesn't work, but a market where you have to be selective," said Jung Sung-in, director of DS Asset Management's ETF team. "The KOSDAQ 150 index contains only about 60% of the total market capitalization, so there is ample room to generate alpha in the remaining areas that the representative index does not cover."
The portfolio also differs from existing active ETFs. "Among the KOSDAQ 150 constituents, companies with a market cap of 1 trillion won or more account for about 86%, but in the DS ETF they are expected to fall below 40%," Jung explained. "Companies with a market cap of less than 1 trillion won are highly likely to make up more than 60% of the portfolio."
He offered a positive outlook on the KOSDAQ market. "Earnings are improving, centered on semiconductor materials, parts and equipment companies, and with the government's delisting of insolvent firms, the introduction of a promotion-relegation system, changes to pension fund benchmarks, and the disbursement of National Growth Fund money, we expect more than 30 trillion won in new capital inflows into the KOSDAQ market in the second half," Jung said. "Now is a good entry point."
The DS KOSDAQ Active ETF has a management fee of 100 basis points (1bp = 0.01 percentage point) per year, the highest level among domestic ETFs. "That means we will invest the most in research and management," Jung stressed. "We will be judged by our performance."
