Why Hong Kong’s SK Hynix fund stayed at full leverage amid market volatility

South Korean investor Carol Kim was initially optimistic about Hong Kong-based CSOP Asset Management's new flexible leverage structure for its SK Hynix leveraged fund. However, her expectations were dashed when the fund maintained maximum exposure despite the revised rules. Kim, who had invested in the product since October, saw a 77.2 percent loss in her Hong Kong investment, far exceeding her domestic position loss of 70.1 percent.

The CSOP SK Hynix Daily Max (2x) Leveraged Product became popular earlier this year, experiencing a surge that mirrored the chipmaker's stock price, which increased by 349.23 percent from the start of 2026 to its peak on June 22. However, on August 3, the fund adjusted its structure, shifting from a fixed 2x leverage model to a flexible ratio ranging from 1.1 times to two times.

This adjustment was intended to provide a buffer, permitting fund managers to reduce exposure during sharp sell-offs and mitigate portfolio volatility during extreme market downturns. Despite this change, CSOP disclosed that the fund continued to maintain its maximum double-exposure limit for three weeks following the modification.

Subsequently, the fund's value plummeted by 26.9 percent during its first week under the new structure and declined by a further 44.6 percent in weekly turnover to HK$40.15 billion (US$5.12 billion). By Thursday, total assets under management had shrunk by nearly 71.5 percent to HK$37.65 billion (US$4.53 billion). The sustained high exposure exacerbated Kim's losses, bringing her total exposure to 77.2 percent, far exceeding her domestic losses.