Korea’s first Metaverse ETF

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On the 13th, four Metaverse exchange-traded funds (ETFs) were listed on the domestic market at the same time. These four products are the first ETFs that bundled domestic Metaverse related stocks. Managers say they have been preparing for listing for a long time, but the listing has been pushed back due to a lack of manpower at the exchange, but it seems to have come out now. Fortunately, the stock price of Metaverse-related stocks is not bad.

If the ETF is listed at the same time, it is very good for reporters. You can compare your grades at a glance. So, I often write articles by comparing the yield by product, such as a monthly report card or a 100-day report card, and adding stories about the industry. Even when 8 active ETFs were listed at the same time on May 25th, many media companies published articles comparing ETFs.

Comparing products is not difficult. You just need to set standards. As Metaverse is the hottest theme these days, investors will be very interested. Whether these four products are ‘real’ Metaverse ETFs, how to compare products, what criteria should be used to select products, and the world’s first Metaverse ETF Let’s talk about how it differs from META in the US.

Simultaneous sortie for 4 operators

The listed Metaverse ETFs are Mirae Asset Management’s TIGER Fn Metaverse ETF, KB Asset Management’s KBSTAR iSelect Metaverse ETF, Samsung Asset Management’s KODEX K-Metaverse Active ETF, and NH Amundi Asset Management’s HANARO Fn K-Metaverse ETF. Bus MZ ETF. If this is the case, it can be seen that all management companies have stepped forward.

These ETFs are themed ETFs that invest in companies related to ‘Metaverse’ among numerous companies. Instead of following market indices such as the KOSPI, Nasdaq, and S&P 500, an ETF designed to create a new index related to a specific theme such as hydrogen, ESG, electric vehicle, and rechargeable battery and follow it is called a theme-type ETF. As life changes due to COVID-19 and the global ETF market grows, most of the recently listed ETFs are theme-type ETFs that invest in megatrends. In Korea, you can see various themed ETFs such as electric vehicles, BBIG, climate change, and carbon credits.

We can tell where this product is investing just by looking at the name of the ETF. The ETF product name is a combination of the manager’s brand and the tracking index. ‘TIGER Fn Metaverse’ was released by Mirae Asset Asset Management and follows the ‘Fn Metaverse Index’. Fn is the brand name of an index calculating organization called FnGuide. ‘KBSTAR iSelect Metaverse’ is a product of KB Asset Management and follows the ‘iSelect Metaverse Index’. ‘iSelect’ is the brand name of an index created by NH Investment & Securities. ‘HANARO Fn K-Metaverse MZ’ was launched by NH Amundi Asset Management and tracks the ‘Fn K-Metaverse MZ Index’. FnGuide’s index was also used. And as the name suggests, Samsung Asset Management’s ‘KODEX K-Metaverse Active’ is an active ETF. The comparative index is FnGuide’s ‘K-Metaverse Index’.

Active vs Passive ETFs

One of the big criteria for dividing an ETF is ‘investment method’. It is divided into passive and active depending on whether you will follow the index or someone will intervene to get a higher return than the index.

Passive means ‘passive’. A passive ETF is a product that selects an index to be tracked by the ETF and sets it to move in the same way. So, TIGER, KBSTAR, and HANARO will reflect the fluctuations in the metaverse index they promised to follow in their ETF price.

Conversely, active, as the names ‘active’ and ‘active’, involve people. Although comparative indices have been set, fund managers sometimes change investment stocks and decide when to trade in order to achieve higher performance than the rise of the comparative index. If you look at the history of ETF holdings, KODEX Metaverse products may have different holdings and weights on a daily basis. If you believe in the capabilities of a fund manager, it would be better to choose KODEX products.

Four Criteria for ETF Selection

Let’s compare these products in a table. After accessing the ‘ETF check’ site, click Compare ETF Products in Analysis Studio and enter the product name of the newly released Metaverse ETF. I can only find up to 4 of them.

Korea's first Metaverse ETF [한경제의 솔깃한 경제]

If you look at the basic information, you can see which indices they follow, and the total payoff can be compared in the next row. Of course, Samsung Asset Management is more expensive than other products. It is an active ETF where human judgment is involved in order to generate excess returns.

Looking at the market cap, Samsung Asset Management and Mirae Asset Asset Management have raised more than 30 billion won. As of the 18th, Samsung KODEX has the highest rate of return.

When products that look similar like this come out at the same time, which one should you look at and choose? ETF experts highlight three principles: low fees, low disparity, and sufficient trading volume. Choose products with low total fees and buy ETFs through a brokerage account, not a bank. That’s the most economical.

Second, the disparity rate should be low. The discrepancy rate is the difference between an ETF’s base price (NAV) and the market price. You can easily check the discrepancy rate by searching for the product name on Naver Finance. Also, avoid trading 5 minutes after opening and 10 minutes before closing.

Third, the trading volume must be sufficient. Investing in low-volume products makes it difficult to trade ETFs at the desired price. If you buy at a higher price or sell at a lower price, your profits may decrease. Another thing to consider is the asset under management, that is, the AUM. The financial investment industry believes that there is a high probability that a ‘large’ ETF with an AUM of 100 billion won or more can attract funds from institutional investors, so there is a high probability that the trading volume will be sufficient. The ETFs we just saw have only been listed for less than a week, so it would be a good idea to buy them after securing enough AUM.

Korea's first Metaverse ETF [한경제의 솔깃한 경제]

The last point I want to emphasize is that theme-type ETFs require a careful look at the constituent stocks. Even with the same theme, each management company’s thoughts on related stocks may differ.

You can see your holdings at a glance on the ETF check site. In HANARO, the combined share of Pearl Abyss, Hive, and Naver accounts for over 30%, and like LG U+ and SK Telecom, telcos own about 20%. KBSTAR is like an enter ETF. The core of the metaverse must be content, anyway. A third is invested in SM, Hive, CJENM, and YG Entertainment, and about 18% is invested in Naver Kakao. TIGER is similar to KBSTAR. Hive, YG Entertainment, and JYP Enter about 30%.

The composition of KODEX’s active ETF may change again, but for now it appears to be a bet on a gaming company. Although it contains the most Hive, there are many game-related stocks such as Pearl Abyss, Krafton, and Wemade in the top stocks. Like J Contentry and NEW, film and drama production companies have also been incorporated.

By the way, although the theme of metaverse is suitable for investment looking 10 years into the future, I am not sure if it will yield immediate results. There is no clear leader in the Korean metaverse market. In this case, I think you should pay attention to individual stocks as well. Now that the Metaverse ETF is listed at the same time, we can get a hint from its constituent stocks. We are keeping an eye on stocks that are commonly included in the four ETFs. Naver, NCsoft, Hive, Pearl Abyss, YG Entertainment, Wysiwick Studio, Dexter, Vibe Company, and APS Holdings were included in common.

Korea's first Metaverse ETF [한경제의 솔깃한 경제]

Compared to META?

The Metaverse ETF came out earlier in the US than in Korea. In June, the world’s first Metaverse ETF was launched. ‘Roundhill Ball Metaverse ETF’, ticker name META. It is an overseas listed ETF containing only foreign companies related to Metaverse. Roundhill Finanacial is a manager outside the top 50 in the US market based on operating size, and is increasing its operating size as this META continues to gain popularity.

META categorizes companies into three types of investment. ‘Pure-play’ companies that are directly related to Metaverse and the growth of Metaverse is directly related to corporate growth, ‘core’ companies that have actual business related to Metaverse, Most of them are classified as ‘non-core’ companies that earn money from sources not directly related to the metaverse. We incorporated stocks across a variety of industries, including semiconductors, hardware, software, games, internet, telecommunications, finance, and media.

Korea's first Metaverse ETF [한경제의 솔깃한 경제]

Korea's first Metaverse ETF [한경제의 솔깃한 경제]

Nvidia, Microsoft, Unity Software, Roblox, and Facebook are ranked high in weight. In addition, there are many other companies that we do not see often, such as Hexagon, Bilibili, and Autodesk, so you will have fun discovering new companies by studying each of them one by one.

Today, rather than the concept of Metaverse, I compared Metaverse ETFs and told you what criteria to select when similar products appear at once in the future. Since metaverse is a promising industry, securities companies are also issuing many reports. For those who are curious about the concept of metaverse, Kyobo Securities Kim Han-kyung and Kim Min-cheol <또 하나의 세상, 메타버스>, Lee Hye-in, researcher at Yuanta Securities <메타버스 첫걸음>is recommended.

Reporter Hankyung [email protected]

Korea's first Metaverse ETF [한경제의 솔깃한 경제]

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