[Interview] Jo Hong-rae, CEO of Quarterback Asset Management, "The Surge is Over... This Year's Keyword is EMP"

Major Central Banks Begin Interest Rate Hikes
Time to Lower Expected Stock Returns
US-Centered Asset Allocation Remains Valid
Lower Expectations for Emerging Markets and China

[Asia Economy Reporter Minji Lee] "The key keywords that will define this year's stock market are EMP (ETF managed portfolio) and dividends. You should abandon the expectation of a sharp bull market driven by liquidity concentrated in certain themes such as electric vehicles, hydrogen, and the metaverse."

Recently, Cho Hong-rae, CEO of Quarterback Asset Management, who met with Asia Economy at the Yeouido headquarters, said this. Having joined Quarterback Asset Management as a self-proclaimed 'EMP evangelist' with a single-minded belief that the era of EMP is coming, after being a veteran analyst in Yeouido, Cho emphasized, "The era when aggressive one-shot investments worked is over," and "It is now important to build assets through slow, loss-averse investing." EMP is a portfolio that utilizes exchange-traded funds (ETFs) diversified across various assets and stocks. It complements the asset allocation limitations of ETFs to achieve a high diversification effect.

When asked about the timing of a stock market rebound, CEO Cho bluntly stated, "The explosive rise of stocks is over." Investors who experienced a rapid surge after the outbreak of COVID-19 continue to invest expecting index gains, but now they need to lower their expected returns. Cho said, "It is a difficult market as major central banks are absorbing market liquidity and have started raising interest rates," adding, "The market is anxious about how much interest rates will rise, but if a clear blueprint emerges after May, there is a possibility that the direction of the stock market could change."

By country, he predicted that the weighting should be increased in developed countries centered on the United States. He expressed a negative stance on emerging market investments. He analyzed, "When interest rate hikes and monetary tightening occur, the first place money will flow out from is emerging markets," and "Some emerging countries like Vietnam and India may rise, but their gains will not increase the overall attractiveness of emerging markets." Regarding bond investments, he suggested focusing on short-term bonds and noted that inflation-linked bonds would also help maintain stable returns.

Regarding the Chinese market, he explained that it is better to invest only a portion of the total assets. CEO Cho said, "Chinese market investors seem to be relying on China's massive investment momentum despite concerns about economic slowdown," and "To invest in the Chinese market, it is better to approach only certain sectors from a long-term perspective rather than investing in the entire index." Since the Chinese market clearly distinguishes between declining industries and growth industries, he judged that it is wiser to bet on sectors with high long-term growth potential, such as electric vehicle ETFs, rather than the entire index.

If individuals find it difficult to allocate assets, investing in EMP funds is also an option. Quarterback offers six thematic EMP funds through its artificial intelligence (AI) algorithm (QBIS).

CEO Cho emphasized, "Active EMP funds available in the market can also be an option, but considering fees and information transparency, AI EMP funds are more attractive." Considering sales commissions and administrative fees of active funds in the market, fees typically amount to about 2%, whereas Quarterback's EMP service charges an annual fee of 0.4?0.8% based on asset management amount, charged in arrears. He added, "Even if rebalancing occurs in active funds, it is difficult for investors to easily verify it, but Quarterback transparently discloses the reasons for asset rebalancing through its app, which is a differentiating factor."

Quarterback, which has grown by providing discretionary and advisory services to financial companies such as insurance firms, plans to focus on expanding individual customers this year. Although sales to financial institutions (B2B) account for 70% of total sales, the company plans to increase individual customer inflow through its app so that in the future, sales from B2B and B2C sectors can form a 50-50 ratio.

CEO Cho said, "AI asset management companies such as the U.S.'s Wealthfront and Betterment, and Japan's WealthaNavi started as startups and have attracted significant personal funds to the extent that they stand shoulder to shoulder with major financial institutions," and added, "We want to establish ourselves as a partner for asset formation by launching pension services, MyData services, and expanding EMP themes."

This content was produced with the assistance of AI translation services.