Recently, amid the rapid growth of the domestic exchange-traded fund (ETF) market, there is an incre..

Recently, amid the rapid growth of the domestic exchange-traded fund (ETF) market, there is an increasing number of cases where there is a gap between the product name and the actual incorporated stock. Although it seems to be investing heavily in a specific group or theme, the actual portfolio includes some non-affiliated or theme-related stocks. Critics point out that it could cause confusion for investors who want to invest “as they like.”

According to the financial investment industry on the 19th, some of the “group stock ETFs” containing key affiliates of major groups incorporate a number of stocks that are not actually group companies. A typical example is a product that focuses on group stocks such as Kakao, POSCO, and Doosan.

The “BNK Kakao Group Focus ETF,” which invests in Kakao Group, includes KB Financial Group, NAVER, Krafton, and Hive in the top 10 stocks incorporated. These companies do not have a direct business connection with Kakao Group or are even in a competitive relationship. However, the proportion of investment in ETFs is approaching a total of 10%.

The situation is similar for the “ACE POSCO Group Focus ETF,” which advocates investment in POSCO Group affiliates. For now, it seems like a passing point as it contains more than 20% of each of the major affiliates in the group, including POSCO Future M, POSCO Holdings, and POSCO International. However, stocks with ambiguous interrelationships such as LX International, LG Energy Solution, Hyundai Steel, and HD Hyundai Marine Solution are included in a total proportion of around 7%. The “WON Doosan Group Focus ETF,” which was listed last month, includes Samsung Electronics (2.22%), Neuromeka (2.24%), and HD Hyundai Construction Machinery (1.68%).

The problem is that this management method increases the gap between investor expectations and actual investment targets. Investors who tried to focus on the growth potential of a specific group are exposed to unexpected stocks, clouding product identity and raising concerns that they could even take on unwanted fluctuation risks. In particular, it is pointed out that as the ETF product name acts as an important criterion for investment judgment, the larger the gap between the name and the portfolio composition, the more it can lead to damage investor confidence.

Lee Jung-hwan, a professor of economics and finance at Hanyang University, said, “It is inevitable that ETFs contain stocks that go against their product names,” and advised, “Individual investors need to fully check product descriptions such as all ETF product investments and investment strategies.”

The current ETF-related regulations are contributing to the creation of such a distorted structure. Under the current Capital Markets Act, ETFs must incorporate more than 10 stocks and meet diversified investment requirements that limit the proportion of certain stocks to 30% or less. However, some groups, including Doosan, POSCO, and Kakao, are forced to incorporate external stocks due to the number of listed affiliates falling short of 10 or the lack of market capitalization and trading volume of some affiliates.

Management companies are explaining such a product structure as an “expanded ecosystem investment.” Regarding WON Doosan Group Focus, Woori Asset Management explained, “The ETF’s underlying index (iSelect Doosan Group Focus Index) is designed to invest in the entire core value chain of the three core future industries (nuclear power plants, semiconductors, and robots) led by Doosan beyond simple group stock ETFs,” adding, “It is a strategy to maximize profitability and stability by incorporating about 10% of external partner companies that share the trickle-down effect with Doosan Group affiliates.”

This “gap between name and investment content” is also being repeated in themed ETFs. The “KoAct American Robot Physical AI Active ETF,” which Samsung Active Asset Management announced to be released at the end of this month, claims to be a robot and physical AI investment product, but the initial incorporation is centered on the U.S. big tech, so-called “M7.” Large technology stocks such as Nvidia (7%), Tesla (7%), Amazon (6.5%), and Alphabet (6.5%) account for the top share, and semiconductor companies such as AMD and Qualcomm are also included. It is not much different from existing NASDAQ index ETFs or tech company ETFs, and it is evaluated that robot-themed intuition is poor.

Lee Hyo-seok, a researcher at the Korea Capital Market Research Institute, said, “If the robot and AI industries grow, the indirect connection between these stocks and robot themes is recognized as U.S. big tech such as Nvidia and Amazon share benefits.”

In response, Yang Hee-chang, manager of Samsung Active Asset Management, explained, “This product is characterized by focusing on companies that lead future physical AI technologies, not traditional robot companies.”