Korean pension funds have shifted their ETF purchasing patterns this year, favoring lower-fee products and selectively increasing allocations to active ETFs with proven outperformance. According to Korea Exchange data, pension funds net sold 459 billion won of Samsung Asset Management's KODEX200 while net buying 69.4 billion won of Mirae Asset Management's TIGER200 this year, despite both tracking the identical KOSPI200 index. The divergence is attributed to fee differentials, with KODEX200 charging 0.15% versus TIGER200's 0.05% management fee. This marks a departure from brand-driven allocation strategies, as pension funds managing trillions in assets prioritize cost efficiency where index replication quality is equivalent across major asset managers.
Pension Funds Diverge on KOSPI200 and KOSDAQ150 ETF Selections
Korean pension funds have exhibited contrasting trading patterns across ETFs tracking identical domestic indices. For KOSPI200 products, pension funds net sold 459 billion won of KODEX200 this year while net buying 69.4 billion won of TIGER200. Over the recent 2 years, pension fund net sales of KODEX200 reached 708.4 billion won, representing the majority of the 902 billion won in total ETF net sales by pension funds during that period.
The pattern extends to KOSDAQ150 ETFs. This year, pension funds net purchased only 1.8 billion won of KODEX KOSDAQ150 compared to 96.8 billion won of TIGER KOSDAQ150. Over the recent 2 years, KODEX recorded 28.5 billion won in pension fund net purchases versus TIGER's 104.8 billion won.
The fee structure explains the allocation shift. KODEX200 charges 0.15% management fees while TIGER200 charges 0.05%. KOSDAQ150 products show a similar fee advantage for TIGER over KODEX. Given that both products track identical indices and maintain sufficient liquidity provider coverage to prevent bid-ask spreads, the 0.1 percentage point fee differential translates to billions of won in cost savings for pension funds managing assets in the trillions.
Shinhan Asset Management's Semiconductor ETF Attracts Pension Fund Capital
In thematic ETFs, pension funds demonstrated selective preferences beyond fee considerations. Among products tracking the KRX Semiconductor index, pension funds net sold 58 billion won of KODEX Semiconductor and net bought 12 billion won of TIGER Semiconductor this year.
However, Shinhan Asset Management's 'SOL AI Semiconductor TOP2 Plus' emerged as the top pension fund pick in the semiconductor category, attracting 66.2 billion won in net purchases this year. The product, launched in March this year, concentrates holdings in Samsung Electronics and SK Hynix while including SK Square and Samsung Electro-Mechanics. Despite being a passive product, it delivered returns significantly exceeding the KOSPI index.
Pension funds absorbed the product's relatively higher 0.45% management fee in exchange for its differentiated portfolio construction and demonstrated outperformance, indicating willingness to pay premium fees when ETF design delivers measurable alpha.
Pension Funds Increase Allocations to Active ETFs with Outperformance Records
In overseas index products tracking NASDAQ100 and S&P500, pension funds showed no clear preference between KODEX and TIGER, as both asset managers have reduced fees to approximately 0.006% in a zero-fee competition.
Within overseas equity ETFs, pension funds increased trading activity in active ETFs. Time Folio Asset Management's 'TIME US NASDAQ100 Active' recorded 10.5 billion won in pension fund net purchases over the recent month. The product's consistent outperformance versus the NASDAQ100 benchmark prompted pension funds to increase allocations starting in the latter half of last year.
While the absolute purchase volume remains modest compared to major index products, the trend represents a notable shift for pension funds that traditionally concentrate investments in benchmark indices and large-cap products. The allocation pattern suggests pension funds recognize the operational capabilities of active ETFs that generate excess returns above market indices, and are expanding indirect investment strategies beyond simple index replication into active management approaches.
FAQ
Why did Korean pension funds net sell KODEX200 while buying TIGER200 this year?
Pension funds net sold 459 billion won of KODEX200 and net bought 69.4 billion won of TIGER200 this year due to fee differentials. KODEX200 charges 0.15% management fees while TIGER200 charges 0.05%, and since both track the identical KOSPI200 index with equivalent liquidity, the 0.1 percentage point difference translates to significant cost savings for pension funds managing trillions in assets.
What semiconductor ETF did Korean pension funds purchase the most this year?
Pension funds net purchased 66.2 billion won of Shinhan Asset Management's 'SOL AI Semiconductor TOP2 Plus' this year, the highest among semiconductor ETFs. The product, launched in March this year, concentrates holdings in Samsung Electronics and SK Hynix while including SK Square and Samsung Electro-Mechanics, and delivered returns significantly exceeding the KOSPI index despite its 0.45% management fee.
How are Korean pension funds changing their approach to active ETFs?
Pension funds increased allocations to active ETFs with proven outperformance records, such as Time Folio Asset Management's 'TIME US NASDAQ100 Active,' which recorded 10.5 billion won in pension fund net purchases over the recent month. This represents a shift from traditional concentration in benchmark index products toward active management strategies when ETFs demonstrate consistent excess returns above market indices.
