AXS Investment, which pioneered the first single-stock leveraged exchange-traded fund (ETF) in the U.S., is exploring the launch of a product based on KOSPI tech stocks. The firm aims to strengthen communication about product structure and gauge local investor demand, given that Korean investor funds constitute 10% of its total assets under management.
Regarding the controversy surrounding leveraged ETFs in Korea, they contend that these products are unlikely to sway the market significantly due to their relatively small market share.
Russell Tensor, President of Trader ETF, revealed during a press conference in Yeouido, Seoul on Thursday that they’re considering products based on Korean companies. He highlighted tech stocks as a key area of interest and mentioned they’re evaluating products tied to KOSPI-listed companies. However, he refrained from disclosing specific stocks or a launch timeline.
Trader is the leveraged and inverse ETF brand launched by AXS Investment in 2024. AXS broke new ground in 2022 by introducing the first single-stock leveraged ETF in the U.S. market. Currently, Trader offers products designed to track daily returns of underlying assets at a specified multiple, as well as products that reset performance targets monthly or quarterly.
Tensor cited the robust base of Korean investors as the primary reason for his inaugural visit to Korea. He stated that out of the total 5 billion USD in assets under management (AUM), 500 million USD comes from Korean investors, underscoring the strong foundation of Korean investor participation.
He elaborated that the visit aimed to engage directly with investors, educate them on product mechanics, and assess demand for various products in the Korean market.
Tensor pushed back against claims that leveraged ETFs amplify market volatility. He argued that in both the U.S. and Korean markets, trading volumes through margin and derivative products far exceed those of ETFs, making it improbable that leveraged ETFs significantly influence overall market dynamics.
On the topic of leveraged ETF investments, he advised that the proportion of leverage in a portfolio should be tailored to an individual’s risk tolerance, age, and the appropriateness of leveraged strategies. Investors should carefully evaluate their risk appetite before venturing into leveraged products.
Tensor noted a decrease in trading volume among Korean investors following the increase in margin requirements for single-stock leveraged ETFs. However, he clarified that the decline in assets managed for Korean investors was not substantial and was partly attributed to underperformance of the underlying assets.
Tensor emphasized that actual trading demand, rather than company fundamentals or growth prospects, is the key criterion for product launches. He explained that they analyze trading volumes, volatility, and investor interest in underlying assets to gauge demand for leveraged products.
When questioned about the decision to launch leveraged ETFs in the wake of the Coupang data breach, he maintained that their judgment was based on trading demand rather than corporate news. He elaborated that they identified product demand due to increased trading volume and high volatility of Coupang stock, coupled with interest in the derivatives market.
Looking ahead, Tensor identified several areas of interest, including semiconductors and power infrastructure related to artificial intelligence (AI). He also mentioned ongoing exploration of companies involved in the AI supply chain, such as those in drones, autonomous driving, rare earths, and minerals, as well as software firms leveraging AI technology.