When Semiconductor ETFs Tripled in a Year, Leveraged ETFs Surged 11-Fold

With the upcoming launch of exchange-traded funds (ETFs) that track double the returns of Samsung Electronics and SK hynix shares next month, data shows that semiconductor leveraged ETFs have outperformed standard semiconductor ETFs in terms of returns.

According to KOSCOM ETF CHECK on April 26, the 'KODEX Semiconductor' ETF from Samsung Asset Management has posted a return of 95.1% so far this year. Extending the period to six months, the return rises to 112.2%, and over the past year, it has surged to 300.86%. If an investor had put 100 million won into this ETF a year ago, the investment would now be worth about 400 million won.

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The 'TIGER Semiconductor 10' ETF from Mirae Asset Global Investments also recorded a return of 90.03% so far this year and a six-month return of 112.07%. Over the past year, the return reached 304.39%.

For leveraged ETFs that track twice the daily returns of the semiconductor indices followed by these ETFs, the returns are even more pronounced. The 'KODEX Semiconductor Leveraged' ETF has posted a return of 215.21% this year, more than double that of the 'KODEX Semiconductor' ETF.

With a longer investment period, the returns expand to more than twice as much. The six-month return for this leveraged ETF is 261.55%, about 1.5 times the return of the standard semiconductor ETF. Over the past year, the return reached 1,115.98%, which is about 3.4 times the return of the semiconductor ETF. An investment of 100 million won would now be worth more than 1.2 billion won.

While one might assume that the returns between an ETF tracking a semiconductor index and a leveraged ETF tracking double those returns would differ by a factor of two, in a consistently rising market, the longer the period, the more the returns expand to three to four times, not just double.

For Samsung Electronics, the share price soared from 55,700 won a year ago to 219,500 won as of April 24, marking a return of around 300%. If there had been a leveraged ETF focused solely on Samsung Electronics at that time, it is estimated that the return would not have been just 600% but more than 1,000%.

This is because leveraged ETFs are designed to track twice the daily return of the index, so when the index continues to rise, investors can benefit from the effect of compounding returns.

Meanwhile, with the approval for the listing of leveraged ETFs based on Samsung Electronics and SK hynix as underlying assets, more than 10 leveraged ETF products are set to launch next month, mainly from major asset management firms.

However, investors should be aware that while leveraged ETFs can generate higher returns during an upward trend, losses can also be magnified in a declining market.

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