Stocks Gain as Investors Seek Stability in Hybrid Investment Products

A 30-year-old office worker, identified as A, has been contemplating investment strategies lately. While many around him have struck it rich through stock investments, the recent volatility in the stock market has left him feeling apprehensive. He is reluctant to put his money into savings accounts, fearing he might miss out on better returns. A is on the lookout for a safe yet profitable investment product. A colleague, B, recommended a hybrid investment product: a bond-mixed exchange-traded fund (ETF). This product aims to provide both stability and profitability.

Bond-mixed ETFs attract 12 trillion won this year

The key theme in the investment market for the second half of the year is undoubtedly 'volatility.' Due to the erratic stock market, traditional 'all-in stock' investments have become challenging, prompting investors to seek 'less risky' and 'more stable' investment products. Bond-mixed ETFs are among these options.

According to the Korea Exchange, as of September 8, the total net asset value of domestic bond-mixed ETFs reached 18.75 trillion won. This figure includes both domestic and international bonds but excludes target date fund (TDF) ETFs. Compared to 6.89 trillion won at the beginning of January, this marks a staggering 172.2% increase, with 11.86 trillion won added just this year.

As the name suggests, bond-mixed ETFs combine stocks and bonds in their management. By including bonds, these products reduce volatility while still pursuing returns from stock market gains. Recently, options have expanded beyond merely investing in representative indices to include specific stocks or themes alongside bonds.

Bond-mixed ETFs are particularly gaining attention in the retirement pension market due to the '70% rule.' In defined contribution (DC) retirement plans and individual retirement pensions (IRP), participants can choose their investment products but can only allocate up to 70% of their contributions to risky assets like stocks. In contrast, bond-mixed ETFs, classified as safe assets for retirement pensions under certain conditions, can be included up to 100% in accounts.

For instance, if a bond-mixed ETF has a 50% stock allocation and an investor puts 30% of their retirement contributions into it, that would expose 15% of their account to stocks. By also including traditional stock products up to the 70% limit for risky assets, the overall stock exposure in the account could reach as high as 85%. This makes bond-mixed ETFs an appealing option for investors looking to increase their stock investment while adhering to retirement pension risk limits.

Han Soo-jin, a senior researcher at Samsung Securities, stated, "The product range is expanding beyond traditional indices and bond-focused investments to include individual stocks and themes alongside bonds. The demand for retirement pensions that maintain stock investment while simultaneously reducing volatility is driving the growth of bond-mixed ETFs."

Investments diversify from semiconductors to automobiles

As investor interest grows, the variety of bond-mixed ETF products is also increasing. This year alone, 20 new products have been launched. Among them, bond-mixed ETFs focused on semiconductor stocks are particularly popular. A notable example is the 'RISE Samsung Electronics SK Hynix Bond-Mixed 50,' launched in February, which allocates 25% each to Samsung Electronics and SK Hynix, with the remaining 50% invested in government bonds and treasury bonds. The net assets of this product surged from 32.2 billion won at launch to 4.19 trillion won as of September 8.

Similarly, the KODEX Samsung Electronics SK Hynix Bond-Mixed 50, launched in April, saw its net assets grow from 21.5 billion won to 1.56 trillion won.

Asset management firms are also rapidly introducing related products. Last month, several new offerings were launched, including the PLUS SK Hynix Sandisk Bond-Mixed 50, FOCUS Financial Semiconductor Holdings Bond-Mixed 50 Active, ACE Samsung Electronics SK Hynix Plus Bond-Mixed 50, and TIGER Samsung Electronics SK Hynix U.S. Treasury Bond-Mixed 50, all focusing on semiconductor-related stocks.

Products that broaden investment targets to include automobiles have also emerged, such as WON Samsung Electronics Hyundai Motor Bond-Mixed 50, 1Q Hyundai Motor Kia Bond-Mixed 50, and KIWOOM Hyundai Motor Group TOP3 Bond-Mixed 50. This shift from combining representative indices with bonds to utilizing individual stocks and themes reflects an expansion in the market.

However, investors should not assume that bond-mixed products are 100% safe just because of their name. In particular, products that concentrate investments in specific stocks like Samsung Electronics or SK Hynix may exhibit greater volatility in the stock component compared to diversified bond-mixed ETFs.

* This article has been translated by AI.