Bond mixed ETF net assets surge by 60%... Demand for retirement pensions drives growth

(Seoul = Yonhap News) Reporter Go Eun-ji = The total net assets of domestically listed bond-based exchange-traded funds (ETFs) were found to have surged by nearly 60% compared to the beginning of the year.

As the volatility of the stock market increases, investor interest in bond-based ETFs that can follow the rise in stock prices while promoting stability appears to have increased.

According to financial information company FnGuide on the 6th, the total net assets of domestic listed bond mixed ETFs (including both domestic and foreign bonds, excluding target date fund ETFs) as of the 3rd were calculated to be a combined KRW 24.3725 trillion. This is a 59.1% increase compared to 15.3208 trillion won at the end of January.

Domestic bond mixed ETFs, excluding foreign bonds such as U.S. bonds, increased 64.6% from KRW 9.4766 trillion to KRW 15.6017 trillion.

A hybrid bond ETF refers to an ETF that manages stocks and bonds together. The advantage is that you can secure stability through bonds while earning additional profits through stocks.

In particular, if the stock proportion is less than 50%, it is classified as a safe asset under retirement pension regulations and can be incorporated up to 100% of the account, so it is also used to increase the actual stock investment proportion of the retirement pension account.

In fact, in June, when stock prices were soaring, the total net assets of the domestic/foreign bond hybrid ETF increased to 25.6227 trillion won.

Since then, as stock market volatility has increased, the total net assets of bond-based ETFs have fallen back to the 24 trillion won range, but remain at a level about 1.6 times higher than at the beginning of the year.

In a situation where there are always expectations for a recovery in stock prices, it is interpreted that the fact that bonds can be combined together to provide a more stable flow than a pure stock ETF is considered attractive to investors.

With retirement pension reserves exceeding 500 trillion won, the steady increase in demand for investing in stocks through pension accounts also contributed to the increase in bond-based ETFs.

In response to this trend, asset management companies are also releasing bond-mixed ETFs one after another.

There were a total of 18 bond mixed ETFs (12 domestic bonds and 6 foreign bonds) listed as of August this year. Of these, 11 contain domestic and foreign semiconductor stocks such as Samsung Electronics and SK Hynix.

Last month alone, four stocks were newly listed, and all of them were stock products that invest in semiconductors.

Sujin Han, a senior researcher at Samsung Securities, said, “The demand for retirement pensions that can reduce volatility while maintaining the proportion of investments in stocks is driving the growth of bond-mixed ETFs.” He added, “The product area is expanding beyond the existing focus on ‘representative indices + bonds’ to ‘individual stocks/themes + bonds, etc.’”

Jeong Da-un, a researcher at LS Securities, said, “Bond-mixed ETFs including Samsung Electronics and SK Hynix, which can be included as safe assets in retirement pensions, are popular,” and added, “This may strengthen the focus on large semiconductor companies and representative stocks in the Korean market.”