KPOP’s Hit Factory Comes to Investing

topical stuff that was very practical. And so I had I've been eyeing this e t F with the ticker k pop since it was filed, and then it launched. And when I read the article that Isabelle Lee wrote about it and found out that it was a twentysomething young man who had the idea launched the e t F and was like some K pop expert, Um, I like, I like these et F story is this is the

sort of independent spirit of ETFs. You know, it's a tough market, but people, um, you know, keep trying with ideas and usually if you see a filing, a lot of times you pull the thread on it and there's like a somebody who can really make a strong fundamental case, even if the initial reaction is oh, really, is this really an investment a vehicle? Um? And I find that to be true over and over. So I really just

wanted to dig into the story. I also wanted to find out the numbers behind K pop. I mean, I don't know what it is. I feel old when I went to one of the videos. It doesn't make sense to me. Um, you know, I'm driving around listening to r M and Nirvana is still like, UM, I want to get I don't want to be the old guy who doesn't know about this, you know, huge area apparently, and so I wanted to explore K pop secretly as well. We're gonna have Isabella Lee, who wrote that story for

Bloomberg News. She's a cross Asset reporter, as well as Jean Wan Lee, who's the brain behind the GTM K Pop There's Time on Brilliants k Pop. Jean one is about welcome to trillions. Hi, thanks for having us, Thanks for having us. Okay, is well, I wanted to start with you. How did K pop come to your attention? Honestly? On Twitter, I was just grolling and I probably saw one of the Bloomberg guys. It could be Eric or Henry,

I don't even remember anymore. And it was about a K pop e t F and it was fun, it was punchy, it was catchy. We you know, we write a lot of things in Bloomberg for many reasons, and we thought that regal traders and just twitter verse would like this because at that time, this was in April. If approved, this K pop e t F would be the first in Europe or US that would be investing in firms benefiting from K pop music. So we were like,

this is exciting. And to Eric's point earlier, my generation my friends are crazy about K pop and I actually was personally a bit excited writing it because I thought my friends would be so jealous, they'd be so happy to hear about this K pop and my friends who aren't even investing, I was kind of sure they would best just because of this K pop ETF. So that

was fun. And then I wrote a follow up story four months after um when the fund lodge and I got to speak with jan One also, so that was cool and I'm sure he can tell you more about the e t F. Okay, Janue, I want to hear where this idea came from, because you know Eric's Eric has never pitched an R E M E T F and I'm going to tell you that it probably would not go over well. But what did you see in in K pop that made you want to connect these dots?

My premise um that K pop fans may also want to invest in KP pop. I don't think this is a new idea in the investment world, because, for example, many test Light owners are also investors in Tesla stock UM, and people tend to want to invest in what they consume and believe in. The same could be set for Warren Buffett, who enjoys McDonald's and Coke on a daily basis.

To my knowledge, UM, SO Korean media entertainment industry has been growing very robustly, and we believe that this is still in its early innings, given that we're witnessing an inflection point in K pop, and we see squid Gain, we see Parasite, we see black Pink, we see bts. These K content K Entertainment UM Korean entertainment are gradually attaining mainstream game status UM globally from what was more

a subculture in the past. So k pop BTFUM is the first of its kind, and it's it's the first vehicle that allows global investors to have exposure into K pop as an industry, as and as an investment theme. While in the past, since all the companies listed companies within the Korean entertainment and media sector are all listed in Korean Exchange and therefore global investors had no way

to gain exposure into. Before we get into how the e t F tries to capture the K pop factor, if you will, UM, just let's go over the numbers. I remember reading an Isabelle's article I'll throw it to you, isabel because you wrote it. I'm not sure if you've got the numbers from Jangue, but the numbers were ridiculous, Like it was. Some of the comparisons blew me away.

It reminded me of when I dug into the video game industry about seven eight years ago, and it's like bigger than movies and music combined or something, and I

was like, Holy moly. And at the time people were kind of laughing off the video game et F. But I I wanted to do a taste test where I took the name out and just put the numbers of the industry of robotics, cannabis, and video games and asked someone to pick what was the best investment, and they're gonna pick video games, but then you show them the name and they're like, oh, I don't want to invest in that. I felt the similar vibe when I read the article what was give me some of the numbers

that that talked about how big k pop is. I think South Korean music really game popularity in when this big YouTube hit called Gangam Style entered mainstream consciousness, and

ever since then it just became even more popular. So for instance, in February, BTS was named I think the global Recording Artist of the Year and they even beat Taylor Swift in Adele and a girl group called Black Pink also became the first musical artist to hit a certain molestone in YouTube I think seventy five million subscriber mark and it they'd beat Justin Bieber. And on our side of the world, this sounds surprising because these are really big names. But then on the other side, you know,

something bigger might even be happening. I will say this, I just the fact that Justin Bieber has something like million whatever is still surprising for a gen X or like me, But your point is well taken, Chenguan, do you have anything with dollars and cents for the industry? So on Spotify, the most streamed music group isn't Beatles, it is in Nirvana, it's not bon Jovi. It's actually BTS with over sixteen point three billion streams and they also hold who whoa whoa whoa hold on a second

six team point three billion billion. It's not millionaire, that's like, holy mo, that's three that's three times more or at least double the amount of people on earth. Joel, Joel, have you have you ever streamed a BTS song? I have. Um. I'm blown away by how just viral the group is. Um And if you haven't never seen them, I mean it's basically a boy band, and they took boy bands

to like a whole another level. Whatever you thought of the Beatles or back Street Boys at a certain era, Like it is insane how much more popular they are. But what's crazy to me, though, is you know what that BTS phenomenon. It's almost like it was the tip of the spear and you've seen so much more. I guess the gang style was the tip of the beer.

But what we're seeing is this robust industry and Janue So I want to bring that back to you because when you when you put together UM the ET you there was an index that you also had to create. How did you go about figuring out what to include in that index and what to exclude so that you could actually like have an investment thesis that could work in practice. So how to define whether a company UM is a K pop or Create an enter entertainment company.

Usually UM et s take UM a revenue based approach, where if if a certain theme generates or of that company's revenue, then UM that company is automamatically placed within the team UM. But but for K pop and Create Entertainment, these revenues are difficult to meet out from a lot of noisy data UM and and and for us, what we did was essentially pinpoint a company that's clearly a K pop company, and it's indubitably a K pop company. For in sense UM the management company, the record company

behind BTS now that's indubitably a K pop company. And what we would do is we would essentially pull some of the major keywords of these undoubtedly K pop companies and we compared to other companies within the industry, and if we figure out a certain level of similarity and if if if the companies meet that standard, then we we we we call that company our target and our theme UM within the within the whole k pop UM

or create entertainment definition. And so I'm looking at the holdings here, j YP Entertainment, h y b E cow I I. You know, I obviously these are all pretty foreign to me UM, but that's probably good it because there are companies that are involved in this niche space UM, and I wouldn't know it. Surprising to me is that they're even publicly traded. Yeah, I guess how much if you were to say, okay, you've got you know, thirty two holdings, he's a waiting, what percent of that weight

is directly linked to like K pop sales? And how did you try to capture that? So s of our constituents are Korean media entertainment companies UM, like the BPS Company, Black Pink Company, and so forth. UM. The other twenty to thirty companies are UM tech infrastructure companies, companies that are comfortable to uh the Apple Music, the Spotify of Korea, so They basically provide UH the infrastructure for music and

content to prosper and and be distributed. So essentially our thirty constituents cover UM music companies, UM To, drama company Niece, and movie companies that that have used UM amy winning series squid Game and UH and and and masterpiece Parasite UM which which which also won a number of hop Awords UM last year. So UM they really do cover the old breadth of of Korean content. UM. That's that's going global. It's interesting. I'm looking at the name of

the fund, it's k pop and Korean Entertainment. So I guess my guess is maybe the SEC work with you to expand the name a little so it was a little more accurate because some of the companies are Korey entertainment. But to your point, I have seen squid Game and I have seen Parasite. They're both masterpieces in my opinion, and I've actually dabbled into some other South Korean stuff just because it seems to be so good. You know.

We I we talked about Nirvana earlier. There was clearly something happening in Seattle when in the early nineties right there was it was an explosion of like entertainment value. It seems like Korea is in that like in that spot like where they're just something's happening there, Like why why is all this art, both music and movies and TV shows? How is it all being produced out of such a small place? Is it feeding off each other? Like is there some kind of I don't know, like

a scene there. Like I'm just trying to figure this out a little bit, because you're right, um, there's definitely a lot of things going on quote in the Korean entertainment area. So this is more my personal view than um than a studied hormal response. UM. But personally I think um UM. We can look at two main factors why create entertainment is seemingly suddenly booming. Number one, Korean

domestic market for music is actually not small. One would consider from a global standpoint, Korea to be a relatively small UM country that's um not generally well known globally, but it is uh even domestically without excluding all the exports um, all the k pop um sales um that are being made on Spotify, excluding all that, just just putting into perspective the domestic sales domestic market size UM for music for your ranks number six in the world.

It's behind UH, the US, Japan, UM, UK, France and Germany. And then it's it's Korea. It's it's larger than China. UM to to the state, it's larger than UH, Brazil or other countries. UM. So domestically, UM Korea does have a big enough of a a local market that would be a good foundation for for a lot of content, a lot of talent to prosper. So that's number one UM. And simultaneously UM, I believe that UM Korean market, while

it's quite big, it's not big enough UM. Let's say UM compared to Japan, which is number two in the world to hold local companies satisfied UM with the kind of market size they can see within the country. So basically, UM, if you were a Japanese music company, if you're a US based record label, UM, you would be happy with with taking a bigger market share in your respective markets

in your respective languages. But for the top K pop companies in Korea, UM, while the market size isn't small, it's not big enough for for for these companies to to be sufficiently growing consistently. So UM these companies have been continuously looking for overseas growth, global growth, rather than UM staying within the borders and being being happy. UM. They kept on knocking doors in Japan, in Southeast Asia, UM, in in Latin America, in the US, UM and in

Europe and so forth. Then they've been doing this for the last ten fifteen years. And you see the numbers that are popping up. UM. It seems like sudden um events out of nowhere, but it's an accumulated effort of time and energy that has been UH continuously skewing out of this small country in the last decade. That's a great point. And you know, Eric, when you said earlier that you've never heard of these companies, I haven't. Also in a way, I just thought they're familiar because of

my friends. But then when I looked at the market cap, they're almost as big as Apple, like hi, And I'm sorry if I'm pronouncing it wrong. I think it's even bigger. Um j YP is just a million. When I say bigger, it's three billion dollars and j YP is like a billion dollars. So these are huge, And to me, it's just really reinforced that the world is so big and that sometimes UM, because I report in the US market.

I just really look at the US market. But then there's just a fast world out there with huge companies with huge potential. Probably right Hid and now is UM in in its for five billion dollar range. To my knowledge, Warner Music is at around seventeen billion last year. That difference UM was much smaller when HI was up to twelve thirteen billion dollars. So these are not small companies. The market taps are comparable to some of the top

music companies globally. UM. So you launched at a tough time. This has been a brutal year. The fund immediately went down UM, but South Korea is down the country as a whole, Like, you have this theme. I've seen other issuers deal with this. You have a theme, it's gonna have a little more volatile than the sort of benchmark. So E W Y would be the benchmark ticker there. That's the South Korea I SHARE's E T F UM. You know, how do you market this thing in that environment?

I'm sure it's difficult. How is that going? How are you getting the story out and overcoming sort of the rougher environment for really all E T s, But especially themes. I don't think we're in the business of of timing market peaks and UM trows were truly long term believers in the prospect of Korean businesses with exposure to K

pop and K entertainment growth. And these are businesses with proven and sustainable I P s and business models and our long term beneficiaries of Korean music and content UM, which is capturing UH disproportionate share of the global growth.

So UM, like you mentioned, it's it's been a tough few weeks across all asset classes since K pop ETFs inception on September one, UM, but we do believe that content consumption, especially digital content consumption, which a lot of K pop or create entertainment is based on, is relatively resilient across UH difficult and and recessionary environments UM and and and and and and basically they're longer term trends.

So we ultimately believe that the underlying performance of the company's in our a E t F will provide further momentum in attracting demand from from a wider global investor universe. So so we are UM doing all the interviews. UM, we are doing what we can um within this market, but in the end um I strongly believe that this is not a a one one hit wonder, It's not a it's not an event, but it's a trend that

will stick. So the fundamental um growth of K pop as a as a as a phenomenon and as a trend will be the long term momentum hopefully um for for our e t F. I've noticed that mattic et s to X point earlier are really booming, but then they've become a lot narrower, I think, although more creative as time passes by. What do you make of that young one? And like, who are you targeting? I don't know to my head there it's a very specific. It's like K pop fans who believe in the firms. Is

that the good question? Are you going to like advisors who manage money and you're trying to sell k pop where you're going to like k pop mega fans and explaining this is how you can invest in it? Well? Um, To be clear, we we we we We don't just believe that this will appeal only to these K pop

mega fans. We also believe that there are clear investment merits and rationale for obtaining exposure to Korean media and a human industry purely from an investment perspective and and therefore ke pop etf is designed not only for global fans but also institutional and retail investors around the world. So UM we do believe that we do believe that this is an independently investment worthy thesis UM and these K pop stops from from a a long term standpoint,

have been moving in such a direction. UM companies like j I p Um, which have some of the top girl groups um UM globally UM they've grown UM substantially more than thirty x in the last UM five to ten years. So these are companies that have shown continued growth UM in both their UM numbers and and their in terms of their share price. So it's an independently

UH reasonable and attractive investment thesism. However, UM initially our target is more towards the K pop fans, who we believe don't just want to consume the content, but I want to own UM part of that growth. So for now we're not going to institutional investors and and pitching the idea UM. We're much more focused on getting this idea out so that people know that we exist, that there is an exposure for them, the ability to gain an exposure into into k as A as as A

as a paradigm. Okay, so I want to ask about what this paradigm could kind of look like, because I mean, we talked about BTS for a second. Ridiculous numbers like basically the most popular musical group in the planet maybe the history of the planet. That's pretty good. Uh, you got Parasite, which best picture, squid Game which became just a total viral Netflix sensation. Tell me what this actually looks like in five years? Are we only going to

be watching and consuming entertainment that comes from Korea? Like? How big can this get? Well, another number you would expect the top UM musician on YouTube with the most subscribers UM would be someone like Ed Sharon or Justin Bieber. But it's actually Black Pink. Now, Black Pink might not appeal to all the generations and all the population UM. It definitely targets a specific age group and and also UM at the same time, it's it's not just targeting

UM English speaking UM population. It's it's a much more globally dispersed fan base. UM. So even if black Pink is not known widely UM within certain groups UM in the US, they're very much widely known UM in the same age group globally. So that adds up to the eighty two point two mile and subscribers on YouTube, which is the single highest number UM out of all the YouTube musicians there are on Earth and Twits, Twitter Twits related to K pop, they were five point one million

back in. Now it's seven point five billion UM in. So the growth isn't isn't fathomable, it's it's difficult to calculate from five five million to seven point by built billion. It's it's it's uh UM. It's it's growth that's comparable to UM. Like what was mentioned video games UM or or in some sense Crypto and in the future UM Squid game. They're producing their second season, it's in it's

in development. And we see new TV series that are produced in Korea and UM whose language is actually Korean and they they they take UM top ten most watched UM English TV series, both in US and globally on Netflix nowadays daily. So so we believe that we're we're just at the starting point UM where it's getting noticed like back in the days when video games were being noticed as as more than a subculture, right before it

became a mainstream theme. I think Korean content is passing by that point of history where it's it's going past UM a subculture, UM into a genre of its own that appeals UM, not just English using population, but but Earth. I want to ask for a sleeper recommendation. So we've talked about some real popular ones that have massive global followings.

What's the one that's like the secret handshake that that I should really know about that's gonna make me seem super super cool when I tell my kids, UM, there's a up and coming new girl group that was produced

by the same record label that produced BTS. That girl group's name is uh New Genes, so jeans they're new New Gens actually hit Billboard's top two hundred UM in a week of its launch, So it's actually UM pretty well known UM not just in Korea about globally, but not as well known as ETS, which is more UM.

You know the the trademark K pop names. So if you've told someone UM in their twenties and their teens that you've you listened to New Jeens, now that's that's something that will get their attention and their their song. Their main song is actually called attention, So it's fitting alright. I will file that a way um my kids into auto tuned hip hop, but maybe he'll know it. How was the reception? Did you get a lot of UM

haters fans? What did people say? K p BTF has been received pretty well my knowledge in in the in the whole K pop fandom sphere and and also locally, UM, I see K pop companies and they all know, um that uh they that k po BTF got listed, um that we we we were the ones that that that accomplished it, and so forth, and and a lot of these k pup companies are are actually quite thankful um for us in that we have provided them, um as as the K pop companies, a way to indirectly interact

with with global K pop fans who now have a way to invest in them. So I think it was pretty well received both industry wise and and and and and K pop random wise. However, it's still us feel quite early in our stage. Um our a U M

isn't booming since inception. Our numbers are definitely down. UM A lot of ets are down, so we're we're we don't think we're unique in this, but had we listed at a better time or or from a longer standpoint, um, we we hope to gain more popularity, not just from an industry point of view, but but as an investment vehicle um for for global investors. Jen want, I want to ask you one final question which we ask a lot of folks on trillions, which is, what is your

favorite e t F ticker other than your own? And I have to tell you K pop is an epic ticker. I mean you you nailed it, so I know that you you should take credit for that. But if you were gonna give anybody else in props, who who else? Would you? Who else? Would you say? It's it's difficult to choose. And I would say, um, nothing really beats KP pop? But I would say, uh, round hill meta verse et F ticker um, which is I think, to my knowledge, um m etv um. I mean that's pretty

uh obviously a metaverse sticker. So um, I think that worked out pretty well. Yeah, I think I think that comes to mind her all right, Jane one Isabelle, thank you so much for joining us on trillions Thanks, Thanks a lot, Joel, Thanks a lot, Eric, and and and and most of the little Isabelle. Thanks for listening to trillions. Until next time. You can find us on the Bloomberg terminal, Bloomberg dot com, Apple podcast, Spotify, or wherever else you'd

like to listen. We'd love to hear from you. We're on Twitter. I'm at Joel Webber Show. He's at Eric Calturnus. This episode of True was produced by Magnus Hendricksen by m m m mmm