Goldman Sachs Dissects the Collapse of South Korean Leveraged ETFs: Exposure Shrinks by Over 70% from Peak, Most Intense Deleveraging May Be Over
Complete. Here is the key summaryData from Goldman Sachs shows that assets under management (AUM) for South Korean leveraged ETFs plummeted from a peak of $53 billion to $15–16 billion, a decline of over 70%. Although there were inflows from investors looking to buy the dip earlier, recent net outflows indicate shaken confidence among retail investors. Analysts point out that the sell-off has decoupled from fundamentals, driven by position squeezes and sentiment to form a downward spiral, suggesting the most intense phase of deleveraging may have ended
The deleveraging process is more than halfway through!
The latest data tracked by Goldman Sachs analyst Alvin So on South Korean leveraged ETFs shows that the AUM of related products has plummeted from a peak of $53 billion on June 22 to $15–16 billion, a drop of over 70%. The proportion of leveraged exposure to South Korea's free-float market capitalization has also compressed from 3.2% to approximately 1.5%, while the South Korean stock market has cumulatively fallen by 40% during the same period.
Notably, although $8–9 billion in capital flowed in to buy the dip between June 22 and July 15, there was a net outflow of about $2 billion in the past two weeks, indicating that retail investor confidence has significantly wavered.
Rajeev De Mello, Global Macro Portfolio Manager at Gama Asset Management, warned that this round of selling has increasingly decoupled from the fundamental logic of AI/semiconductors, turning instead into a self-reinforcing downward spiral driven by position squeezes, forced liquidations, and investor sentiment.
