Retail investors are piling into South Korean space-themed exchange-traded funds (ETFs) ahead of a SpaceX listing. After Korea Investment Management formalised its participation in SpaceX’s initial public offering (IPO), demand has concentrated on active ETFs that could receive related allocations.

Korea Investment Management said on June 8 that net buying by retail investors in its ACE US Space Tech Active ETF over the past month exceeded 60 billion won.

According to the Korea Exchange, as of June 5 retail investors put 61.2 billion won of net buying into the ACE US Space Tech Active ETF over the past month. Over the same period, retail investors were net buyers of the ETF except for 3 trading days.

The recent inflows are seen as reflecting demand linked to SpaceX’s upcoming listing. Korea Investment Management said on June 4 it would participate in the SpaceX IPO.

SpaceX shares allocated through IPO participation are set to be split and added to the ACE US Space Tech Active ETF and the Korea Investment Global Space Technology & Defense fund.

As of June 5, Korea Investment Management was the only domestic asset manager to formalise participation in the SpaceX IPO. As a result, for retail investors the ACE US Space Tech Active ETF is emerging as a way to gain indirect access to IPO allocations before SpaceX lists.

Korea Investment Management plans to expand SpaceX’s weighting in the ACE US Space Tech Active ETF to as much as 25 percent through additional purchases, including on the listing day. If SpaceX establishes itself as a representative stock of the global space industry after listing, it could also directly affect the ETF’s performance.

Still, volatility warrants caution as expectations for SpaceX’s listing could be quickly reflected in prices. In particular, soon after listing, the stock’s performance versus the IPO price and changes in the weighting are expected to affect the ETF’s returns.

Nam Yong-su (남용수), head of the ETF division at Korea Investment Management, said, "Through this product, investors can participate indirectly in the SpaceX IPO." He said it was a difference from passive products, for which IPO participation is difficult.