(Bloomberg) -- Tesla Inc. dropped out of the top 10 holdings of a South Korean electric-vehicle mutual fund for the first time ever amid its epic selloff last year.

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The Korea Investment Management Co. fund steadily reduced its Tesla exposure to less than 2% of its net asset value in order to reduce volatility. The US EV giant previously had accounted for as much as 9% of the fund, which was started in 2017.

“We thought many external and internal elements were not favorable,” Hwang Woo-taek, lead manager of the $1.3 billion fund, said in an interview with Bloomberg last week. Negatives include growing competition from traditional automakers and Elon Musk’s stake sales to fund his purchase of Twitter Inc., he said.

Even with last year’s 65% slide, Tesla is still trading at more than 28 times estimated earnings for 2023. That compares with 21 times for the Nasdaq 100 Index.

“We need something else to justify its valuations,” said Hwang, whose fund has beaten 98% of its peers over the past three years. The company needs to prove it can meet expectations, such as with new models and its plans to internally produce batteries to lower costs.

While trimming its bet on Tesla, the fund has increased exposure to stocks related to EV charging stations including Eaton Corp. and ABB Ltd. Hwang also remains bullish on EV battery stocks and is ready to buy more when their share prices drop.

South Korea’s own LG Energy Solution Ltd. may see “a lot of selling volume” later this month when the lock-up expires on holdings by employees who acquired shares in the battery-maker’s initial public offering, Hwang said.

Hwang’s fund ranked among top performers over the past three years, thanks in large part to its holding of Tesla during its meteoric pandemic rise. In 2022, the fund recorded its worst ever performance, losing about 28% amid weak sentiment toward the EV industry.

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