Starting Thursday, investors can buy shares of entertainment companies behind Korean music and culture through a new exchange-traded fund, or ETF, on the NYSE Arca exchange. Trading under the aptly named ticker KPOP, the ETF includes the stocks of 30 corporations, including four music companies that gave K-pop artists exposure to fans worldwide: HYBE (BTS, Tomorrow X Together, Enhypen), SM Entertainment (SuperM, NCT 127, Girls’ Generation), JYP Entertainment (Stray Kids, Twice); and YG Entertainment (BlackPink, Big Bang).
The popularity of music group BTS and the Netflix show “Squid Games” is evidence of a global appetite for Korean entertainment — and that could resonate with investors looking for a growth opportunity. “We think there are both retail and institutional investors interested in being part of that financial opportunity,” says Jangwon Lee, CEO of CT Investments, the company behind the K-pop-themed ETF.
No newcomer to music, Lee is also CEO and co-founder of Beyond Music, a Seoul-based company that invests in music assets and owns the rights to about 25,000 songs spanning from 1980 to 2010, according to Lee. Beyond Music is a subsidiary of Contents Technology, CT Investment’s parent company.
In South Korea, K-pop fans and other retail investors can easily own shares of K-pop companies because they trade on South Korea exchanges. In fact, BTS fans turned out for the initial public offering of its company, Big Hit Entertainment (later renamed HYBE) in Oct. 2020. But U.S.-based K-pop fans would find it “almost impossible” to buy the individual stocks within KPOP on a Korean exchange, says Lee.
An ETF — which can be bought and sold on-demand like individual stocks — allows U.S. investors to buy foreign stocks on a domestic stock exchange. KPOP is part of a growing trend of ETFs that provide investors with exposure to targeted industries with low expense ratios. Currently, there are 2,952 ETFs listed in the U.S. with $6.25 trillion in assets and $202.5 billion of daily ETF transactions, according to NYSE. The biggest ETFs are run by the most prominent names in investing: Blackrock, Vanguard, Invesco, Charles Schwab and State Street Global Advisors. Just as KPOP focuses on South Korean culture and entertainment, many ETFs are focused on specific industries such as cannabis, electric vehicles, solar power and cryptocurrencies.
With 30 companies in the ETF, KPOP expands beyond K-pop music into a broader category of Korean culture and entertainment. CJ E&M, for example, owns Mnet, South Korea’s largest music TV channel, and a record label, Wake One Entertainment. But CJ E&M also produces film and television programs, including the film Parasite, winner of Best Picture at the 2020 Academy Awards, and television shows It’s Okay To Not Be Okay and Crash Landing On You. Studio Dragon produces television shows such as the Netflix series Kingdom: Ashin of the North, My Holo Love and Sweet Home. No single company has more than 10% of the ETFs value, and some stocks have less than a 5% weighting. To be eligible, a company’s market capitalization must exceed 100 billion KRW, or roughly $74 million.
KPOP also includes names more associated with technology. Kakao, which operates KakaoTalk, South Korea’s largest mobile messaging service, is the parent company of Kakao Entertainment, the owner of Melon, South Korea’s largest music streaming platform, with 33 million users and about five million subscribers in 2021, according to reports. Naver, a tech conglomerate with 2021 revenue over $5 billion, owns online story platform Webtoon, which in 2021 established a joint venture with HYBE to create webcomics or web novels based on BTS and other artists.
As for the timing of KPOP’s launch, Lee says the company “took the leap of faith because, unlike the recent bearish market and market crash, in the past two months, HYBE has risen 27% and during the same time YG is up 45%. JY is up 28%. We’re looking at a lot of Korean content companies that are outperforming the bearish market. There’s a lot of market tailwind, a lot of good news.”