South Korea's market for bond-mixed exchange-traded funds has topped 20 trillion won ($14.4 billion) for the first time, driven by rising retirement pension investment. Growth is accelerating as the product lineup expands beyond benchmark indexes such as the KOSPI 200 and the S&P 500 into semiconductors, automobiles, space technology and commodities including gold and silver.
Net assets of domestic bond-mixed ETFs, including target-date fund ETFs, stood at 20.5792 trillion won as of the 31st of last month, according to the Korea Exchange on the 1st. That is up 12.5553 trillion won, or 156.5%, from 8.0239 trillion won at the end of last year. Compared with 2.5604 trillion won at the end of 2024, the market has grown roughly eightfold in less than two years.
The expansion is most pronounced in the retirement pension market. With domestic retirement pension reserves now at about 550 trillion won, demand to invest in equities through pension accounts has increased amid the stock market rally. Money is flowing in mainly through defined contribution plans and individual retirement pensions, in which subscribers manage their own reserves, analysts said.
Under current rules, DC and IRP accounts can allocate no more than 70% of total reserves to risk assets such as equity ETFs. Bond-mixed ETFs with equity weightings of 50% or less, by contrast, are classified as safe assets and face no separate investment cap. That allows investors who have already reached the risk-asset ceiling to buy bond-mixed ETFs with their remaining reserves and raise their overall equity exposure. Including bonds also lowers volatility compared with pure equity ETFs, another advantage cited by market participants.
The product lineup is diversifying quickly. Earlier offerings mostly paired bonds with domestic and overseas benchmark indexes such as the KOSPI 200, the S&P 500 and the Nasdaq 100. More recently, funds combining bonds with individual stocks or specific industries and themes have come to market in succession.
Semiconductor-linked bond-mixed ETFs are a prime example. The RISE Samsung Electronics SK hynix Bond Mixed 50, listed in February this year, was the first domestic product to hold semiconductor stocks including Samsung Electronics (005930) and SK hynix (000660) alongside bonds. Money flowed in rapidly after listing, and net assets surpassed 4 trillion won. Six ETFs combining Samsung Electronics and SK hynix with bonds have listed this year, and follow-up products have continued to arrive. Last month, the ACE Samsung Electronics SK hynix Plus Bond Mixed 50 and the TIGER Samsung Electronics SK hynix U.S. Treasury Mixed 50 debuted on the market. The ACE product holds about 21% each in Samsung Electronics and SK hynix and about 9% in Samsung Electro-Mechanics (009150), with the remaining 49% allocated to Korean treasury bonds. The TIGER product holds 25% each in Samsung Electronics and SK hynix and invests the rest in U.S. Treasuries and ultra-short-term U.S. Treasury ETFs. The structure pairs domestic semiconductor shares with dollar-denominated U.S. debt to diversify across both assets and currencies.
The lineup has broadened beyond chips to funds holding financials, semiconductors and holding companies together, as well as products investing in the Hyundai Motor Group and space technology. Funds pairing bonds with precious metals such as gold and silver, or with the KOSDAQ index, have also emerged to reduce volatility.
Han Su-jin, an analyst at Samsung Securities (016360), said the field is widening from a focus on benchmark indexes and bonds to products that combine bonds with individual stocks and themes. Retirement pension demand to maintain equity exposure while lowering volatility is driving the growth of bond-mixed ETFs, the analyst added.
