ETFs Go 'Active'... 'Money Moves' Since the Second Half of Last Year

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Actively managed Exchange Traded Funds (ETFs) are attracting inflows at a rapid pace. Since the sharp influx of capital began in the second half of last year, the total net assets have grown by as much as 650 times in just five years. In particular, thanks to the strong performance of the KOSPI, capital is flowing into Korean equity active ETFs, driving the market size to expand rapidly.

According to Mirae Asset Securities on April 21, the total net assets of active ETFs increased from 34.8 billion won in 2020 to 22.6256 trillion won as of April 17. The share of active ETFs among all equity ETFs (active + passive) has also steadily increased since 2023, reaching 8.7%.

Within the active ETF segment, overseas equity ETFs account for 11.3851 trillion won, while Korean equity ETFs stand at 11.2406 trillion won, showing a similar proportion. Since the launch of overseas equity active ETFs in April 2021, the overseas share had climbed to 63%. However, starting in May last year, the proportion of Korean equity active ETFs rose from 36.2% to 49.7%.

The proportion of active ETFs among newly listed ETFs, which reflects market interest, has also grown recently. So far this year, 35.5% of newly listed equity ETFs have been active ETFs, surpassing the previous five-year average of 27.8%. Considering that most of the recently listed thematic ETFs have been active ETFs, this trend is expected to intensify.

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The most notable aspects of the active ETF market are ▲ the broad expansion of capital inflows into active ETFs since the second half of last year ▲ and the acceleration of inflows into Korean equity active ETFs.

The average monthly inflow into active ETFs was only 5.95 billion won between 2021 and 2024. However, last year, the monthly average inflow soared to 52.69 billion won. This year, the average monthly inflow has surged even further to 98.63 billion won.

In particular, the inflow of funds into Korean equity active ETFs is accelerating rapidly. The monthly average was just 2.86 billion won from 2021 to 2024, but last year it jumped to 16.03 billion won. So far this year, the monthly average has already reached 78.59 billion won, accounting for 79.4% of all active ETF inflows. Funds have concentrated especially in KOSPI active ETFs, while in the KOSDAQ active ETF segment, over 800 billion won has been invested in just two products combined.

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As funds have concentrated, the influence of active ETFs in the domestic stock market has also grown. A representative example is the new listing of KOSDAQ active ETFs on March 10. Anticipation of KOSDAQ revitalization policies led individual investors to make net purchases totaling 1.2363 trillion won in just five trading days for the two KOSDAQ active ETF products.

The effect on individual stocks has varied depending on whether they were included in active ETFs. Because the proportion of each stock in active ETFs differed, and at the same time, there was a net outflow of 841.3 billion won from existing passive ETFs such as the KOSDAQ 150 ETF. As a result, stocks that were not included in the traditional KOSDAQ 150 ETF but saw large inflows recorded higher returns. Jae-hong Yoon, a researcher at Mirae Asset Securities, explained, "Given the frequent inclusions and exclusions characteristic of active ETFs, the expansion of the market is likely to increase volatility for individual stocks."

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