Invest1 publisher3 min readPublished
Four of five Korean 'patriotic' funds doubled in a year whatever their mandate
Four of five Korean 'patriotic' funds reviewed by Seoul Economic Daily returned 105% to 147% over the past year. Returns that close across governance, chip-growth and industrial-policy mandates point to a lift across the whole market more than to any one strategy.
The Investor · Invest desk
What happened
- KB Asset Management's KB Korea Star, heir to the 1999 Buy Korea fund, has returned 753.59% since 2006 by buying governance improvers and undervalued blue chips.
- Korea Investment Management's Korea Power feeder fund, with more than 55% in Samsung Electronics and SK hynix on Sept. 21, has returned 1,048.22% since its 2006 start.
- NH-Amundi Pilseung Korea, set up in 2019 after Japan curbed exports of three chip materials, has widened into transformers, nuclear power and AI infrastructure.
- Mirae Asset's TIGER K Defense & Space ETF, which holds Hanwha Aerospace, KAI, Hyundai Rotem and LIG Nex1, returned 5.18% over the past year.
Compiled by The InvestorSomething wrong?How this is made
Why it matters
- contradiction The chip-heavy growth fund leads the governance fund by 295 points since 2006, so the long record does not single out governance as the reason these funds paid off.
- constraint Active governance managers now face a cheap passive yardstick of 100 shareholder-return companies, and in the one year on record that index came out ahead.
- cost NH-Amundi gives up half its management fee on a fund of about 3 trillion won to pay for chip scholarships and research, a cost that grows with every won the fund adds.
The two 2006 funds give the cleanest comparison. Both own Korean large caps, but they pick them on different theories. KB Korea Star buys companies expected to improve their governance, plus undervalued blue chips, whatever the market is doing [3]. The Korea Power feeder fund buys growth at a reasonable price and holds it for two to three years [6]. Over the past year their returns were 2.1 percentage points apart [5].
Over the full run, compounding each since-inception figure across roughly 20 years gives about 13.0% a year for the growth fund and about 11.3% for KB Korea Star [9][1]. Take out the latest year and KB Korea Star had turned 1 won into about 4.16 won. Or rather, for someone who held from launch, about 7.8% a year for some 19 years [2]. Its 105.11% gain in the past year [5] then more than doubled that. Pilseung Korea splits the same way: about 3.01 times its starting value before the latest year [7], then 146.62% in it [11].
The governance idea now also comes as a passive index. Samsung Asset Management's KODEX Korea Value-up tracks the Korea Exchange's Value-up index of 100 companies that buy back and cancel shares or raise dividends [13]. The product is aimed at lifting domestic valuations while retail investors pile into U.S. stocks [13]. It returned 129.36% over the past year [14], 24.25 points more than the actively run governance fund [6].
The numbers fit more than one reading. If the Korean index rose about as much, these funds are mostly market exposure with a public-interest slice attached [4]. In KB's case that slice is 10 basis points of sales fees and 5 of management fees [4]. In a second reading, KB Korea Star beat the index after fees since 2006, and the governance tilt earned something its branding did not. Or the past year is the outlier, and the fair long-run figure for the governance fund sits nearer 7.8% than 11.3% [2][1]. The article does not give a benchmark return or any fund's fee rate.
I think the record supports a narrower claim than the governance case. These funds were once criticized as emotional marketing [1], and that charge does not survive compounding of 11% to 13% a year [1][9]. Whether governance caused the returns is a separate question, and the higher long-run rate belongs to the semiconductor-heavy fund [9]. The counter-case is that one year of a passive tracker beating an active fund says nothing about 20 years of stock-picking, and it is a fair point. An after-fee benchmark series showing KB Korea Star ahead of the market since 2006 would prove this view wrong.
What to watch
- A published after-fee comparison of KB Korea Star against the Korean index since 2006 would settle whether the governance tilt added anything.
- Whether the Korea Power fund keeps more than 55% in Samsung Electronics and SK hynix as its two-to-three-year holding period turns over.
- Flows into KODEX Korea Value-up set against retail buying of U.S. stocks, the gap the product was built to narrow.