Investing in the latest trends can be a money maker or a disaster, as those who bought into the Squid Game cryptocurrency discovered recently.
The crypto, inspired by the popular Netflix TV show where indebted people play deadly versions of children’s games to win eyewatering sums of money, was bid up last week but has since lost almost all of its value.
While this was more of a hoax than an investment, buying into the Korean stock market is one way to put money to work in the region without the risk of having to enter the Squid Game yourself.
The MSCI Korea index has made investors 53.1% over the past five years, slightly ahead of both the MSCI Emerging Markets and MSCI AC Asia Pacific ex Japan indices.
Total return of indices over 5yrs
Source: FE Analytics
That is not to say it is risk-free. So far this year, it has lost 10.2% while the broader indices are flat.
Korea has become something of a tech haven over the past several years and is one of the world’s largest producers of semiconductors. Last year during the shortage, when prices rocketed, the market soared 40.2%, making it one of the best investments globally.
Chipset values are still high as supply remains constrained and competition has ramped up between tech giants in the US and China.
Below Trustnet looks at how investors can access the market.
Passive funds
According to fund shop AJ Bell, there are four exchange-traded fund (ETF) options for investors. The £4bn iShares MSCI Korea UCITS ETF is by far the largest: it tracks the MSCI Korea 25/50 index, which is designed to measure the performance of the large- and mid-cap segments of the market.
Investors that want to buy Korean stocks will have to take a view on Samsung Electronics. The technology giant is by far the largest company in the market and takes a 23% weighting in this fund.
Overall, the technology sector makes up more than one-third of the passive fund, meaning investors must also take a view on whether its growth can continue.
The other options are the £317m Franklin FTSE Korea UCITS ETF, which tracks the FTSE Korea 30/18 Capped index of large caps, while the £89m Xtrackers MSCI Korea UCITS ETF tracks the MSCI Korea 20-35 Custom index and the £36m HSBC MSCI Korea Capped UCITS ETF replicates the broader MSCI Korea index.
Active funds
There are two options for investors that want to take an active approach to Korea. The largest is the £1.1bn JP Morgan Korea Equity Fund, run by John Cho and Ayaz Ebrahim.
Over the past five years the fund has beaten the Korea Stock Exchange composite benchmark, returning 92.8% against the index’s 35.3%.
Performance of fund vs index over 5yrs
Source: FE Analytics
The other is the £79m Barings Korea Trust. Managers Eunice Hong and SooHai Lim have returned 9.2% since taking charge in 2018, 0.6 percentage points less than the Korea Stock Exchange Composite index.
Due to the limited size of the market and the reduced number of options, the fund has an active share of 53%, meaning around half of the portfolio is the same as the index, although around 15% of the fund is not included in its benchmark at all.
| Fund | Sector | Fund size | Manager name(s) | Yield | OCF |
| Barings Korea Trust | IA Specialist | £79m | SooHai Lim, Eunice Hong | 0.4% | 0.94% |
| Franklin FTSE Korea UCITS ETF | Gbl ETF Equity - Korea | £317m | N/A | N/A | 0.09% |
| HSBC MSCI Korea Capped UCITS ETF | Gbl ETF Equity - Korea | £36m | N/A | N/A | 0.5% |
| iShares MSCI Korea ETF | Gbl ETF Equity - Korea | £4068m | N/A | N/A | 0.62% |
| JPM Korea Equity Fund | IA Specialist | £1096m | John Cho, Ayaz Ebrahim | N/A | 0.96% |
| Xtrackers MSCI Korea UCITS ETF | Gbl ETF Equity - Korea | £89m | N/A | N/A | 0.65% |