Achievement Recorded 7 Years After Release
The Korea Financial Investment Association announced on the 9th that pension assets managed through Target Date Funds (TDF) surpassed 10 trillion won as of the first quarter of 2023.
The association explained that this milestone comes seven years after TDFs were first launched domestically in 2016, indicating continuous growth of TDFs centered around the pension market. In particular, TDFs now account for about 20% of the retirement pension market, establishing themselves as a representative performance-linked product.
From 2018 to 2021, the accumulated funds in TDFs within retirement pensions more than doubled each year, driving money movement toward performance-linked products.
Supported by this growth trend, 2 to 4 new companies enter the market annually, creating a foundation for product diversification and increased competition. By vintage, TDF 2025, 2030, and 2045 recorded cumulative net assets in that order, showing a bimodal distribution.
This is interpreted as investors choosing vintages that suit their preferences regardless of their retirement timing. In terms of performance, TDFs have consistently delivered stable management results between overseas equity funds and domestic bond funds each year.
During stock market upswings, TDFs synchronized with major global indices to generate returns, while in downturns, they partially protected against losses. This led to TDFs outperforming principal-guaranteed products in long-term cumulative returns.
Based on retirement pensions, the cumulative returns from 2018 to the first quarter of 2023 were 15.7% for TDFs and 9.1% for principal-guaranteed products. During the same period, the cumulative inflation rate (CPI) was 11.6%.
Na Seok-jin, Head of the Industry Market Division at the Korea Financial Investment Association, stated, “TDFs are Korea’s first pension-specialized products. With the introduction of the retirement pension default option (pre-designated management) system and growing interest in pension investment, we expect the growth of TDFs to continue.” He added, “TDFs align well with the long-term and installment nature of pension investments and are ultimately expected to contribute to improving retirement pension returns and increasing the pension assets of the public.”
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