Turtle Capital and Trader ETF ‘10-25% of assets under management are Korean investors’

Turtle Capital and Trader ETF “10-25% of assets under management are Korean investors”

Individuals, 7 leveraged ETFs among the top 20 overseas stocks with 6-month purchase/sell settlement

(Seoul = Yonhap News) Reporter Kang Su-ji = Overseas leveraged exchange-traded fund (ETF) brand executives are visiting Korea one after another. This can be interpreted as a move to confirm marketability as Korean investors have established themselves as major buyers of overseas leveraged products.

According to the Securities Information Portal of the Korea Securities Depository on the 24th, looking at the top 50 overseas stocks by purchase and sale payment amount for the past six months by Korean individual investors as of the 22nd, 7 of the top 20 stocks were leveraged and inverse ETFs.

Russell Tensor, CEO of Tradr ETFs, an American leveraged ETF brand, held a press conference in Yeongdeungpo-gu, Seoul on the 17th and said, "We are considering launching a product that uses KOSPI listed stocks as underlying assets." “We are looking at technology industries based in Korea,” he said, without mentioning specific products.

Trader ETF is a leveraged/inverse ETF brand of U.S. management company AXS Investment, and is the first company to launch a single-stock leveraged ETF in the U.S. market in 2022.

Previously, on the 8th, Matthew Tuttle, CEO of U.S. ETF management company Turtle Capital Management (TCM), held a meeting in Seoul.

The reason for their successive visits to Korea is the expansion of the Korean investor base.

Trader ETF reported that Korean investors are trading and holding $500 million, or 10% of $5 billion in assets under management (AUM). Popular products in Korea included SanDisk 2x long (SNXX), NuScale 2x long (SMU), and Lumentum 2x long (LITX).

CEO Tuttle also mentioned that Korean investors account for 25% of the assets of the leveraged product (T-Rex ETF), which is jointly managed with REX Financial, an ETF product issuer.

The procession to visit Korea continues at the end of this month.

The Chief Operating Officer (COO) of REX Financial, an American ETF issuer, and the ETF/ETN manager of BMO Capital Markets, a Canadian investment bank, will hold a press conference-style dinner in Seoul on the 28th. The two companies have been launching up to 3x leveraged and inverse ETNs through the Microsectors ETN brand since 2018.

An official in the overseas ETF industry said, "As Korean investors have shown great interest in overseas leveraged ETFs, Korea has become a large customer among overseas ETF brands. As the market has suddenly grown, they also appear to have visited Korea one after another to examine the Korean market and find new opportunities."

Domestic investors’ preference for leverage is also clearly revealed in Savero data from the Korea Securities Depository’s securities information portal.

Looking at the top 50 stocks by purchase and sale payment amount for the past 6 months as of the 22nd, 10 out of 17 ETFs were leveraged/inverse products, and 7 out of the top 20 stocks were leveraged/inverse. The payment amount above was Direxion Daily Semiconductor Light Triple (SOXL), reaching $56.4 billion (approximately KRW 76.4 trillion). It is more than six times larger than Micron ($9.2 billion), the number one individual stock.

The same trend can be seen in the holding balance. Among the top 50 stocks based on storage amount on the 21st, 5 were leveraged ETFs. The leveraged ETF held the most by domestic investors was SOXL, with a balance of approximately $5.93 billion. ProShares UltraPro QQQ (TQQQ) followed at $5.04 billion.

In the case of SOXL, individual investors bought and sold an amount exceeding 9 times the stock balance over 6 months.

An official from a domestic asset management company said, “Most index-tracking models are 3x leveraged, and individual stocks are concentrated in highly volatile stocks such as Micron, SanDisk, and Tesla.” He added, “It may be suitable for short-term volatility trading, but if you start investing with leverage because you are fooled only by the high returns in a bull market, you need to be careful because the volatility of AI stocks, which are the underlying assets, is very high.”