[Why&Next] Didim Fund, a New Breeze for Retirement Preparation?

Common Brand 'Didim' of 25 Asset Management Firms
Retirement Cannot Be Secured by Principal and Interest Guarantee Alone

Seo Yu-seok, Chairman of the Korea Financial Investment Association, who has nearly 40 years of experience in the financial investment industry, has been contemplating the industry's role in 'increasing retirement assets for all citizens' since his inauguration. Chairman Seo explained the purpose of planning the Didim Fund by saying, "We have prepared products to help office workers accumulate sufficient assets upon retirement." He added, "Through the launch of the Didim Fund, I hope the asset allocation capabilities of the management industry will advance to the next level and that the stable performance of the Didim Fund will practically contribute to increasing retirement assets nationwide."

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'Seeking Higher Returns than Savings and Deposits' Didim Fund Launched Simultaneously by 25 Companies

Under the leadership of the Korea Financial Investment Association, 25 asset management companies simultaneously launched the pension-specialized asset allocation fund 'Didim Fund' on the 25th of last month. The Didim Fund is an industry joint brand of balanced funds (BF), a type of asset allocation fund that is an effective method for long-term pension investment. The 25 participating management companies launched only one representative fund that concentrates asset allocation capabilities. It is a product that secures stability by diversifying investments across various assets such as stocks and bonds while pursuing higher returns than savings and deposits. It is an asset allocation product of the balanced fund type launched after the revision of the retirement pension supervisory regulations. Compared to funds that can be 100% included in the same retirement pension, it allows for a higher allocation ratio to assets.

Choi Jae-won, a researcher at Kiwoom Securities, said, "The Didim Fund is a pension fund-type asset allocation fund that pursues mid- to long-term returns through asset allocation strategies," adding, "It is expected to provide various options between target-date funds (TDFs), which adopt aggressive asset allocation in the early stages of investment, and principal-guaranteed products."

With the supply of balanced funds to the retirement pension market, pension investors now have a wider range of choices. Moreover, the entry of small and medium-sized asset management companies into the retirement pension market is expected to increase efficiency.

Kang Sung-soo, Executive Director of the Solutions Headquarters at Korea Investment Trust Management, explained, "The Didim Fund is designed as a medium-risk, medium-return product that can be used during both the accumulation and withdrawal phases," adding, "It aims to achieve stable excess returns above bank interest rates through global asset allocation." He further noted, "Considering the increased living costs after the COVID-19 pandemic, the Didim Fund will be a good investment tool," and predicted, "Since multiple funds sharing the same keyword 'Didim' compete in performance, there is potential for performance improvement through healthy competition."

An asset management company official said, "Existing balanced funds received less attention compared to TDFs," and expressed expectations that "after the launch of the Didim Fund, joint marketing by management companies will highlight the importance of asset allocation in long-term investment, making it a good topic."

KOFIA Actively Supports Didim Fund Activation... Industry Efforts to Secure Market Lead

The Korea Financial Investment Association is implementing various support measures to widely promote the Didim Fund. Even before its launch, slogans and promotional shorts contests were held to inform investors about the purpose of introducing the Didim Fund.

Asset management companies that launched the Didim Fund are striving to secure early market dominance. KB Asset Management introduced the 'KB Didim Dynamic Asset Allocation Fund,' a global asset allocation specialized fund that flexibly adjusts the ratio of stocks and bonds according to market conditions. The strategy is to generate excess returns by flexibly adjusting the stock ratio within the 30-50% range while securing stable interest income through bond investments. Lee Seok-hee, Head of Pension WM Division at KB Asset Management, said, "We have an optimized asset allocation management system utilizing our own research capabilities," adding, "It will be a good investment alternative not only for pension subscribers who require long-term investment but also for conservative investors who prefer deposits."

Korea Investment Trust Management introduced the 'Korea Investment Didim CPI+ Fund,' which aims for investment returns exceeding the inflation rate through global diversification. It invests in traditional assets such as stocks and bonds, as well as alternative assets related to inflation rates, including gold, commodities, real estate, and infrastructure, to pursue investment performance exceeding the consumer price inflation rate over the long term.

Kiwoom Asset Management launched the 'Kiwoom Didim The Nopi EMP Fund,' which diversifies investments in exchange-traded funds (ETFs) worldwide. It is designed to minimize investment risk while generating stable returns through an AI-based automatic asset allocation system using big data and flexible market response capabilities. The fund aims to increase mid- to long-term expected returns by precisely diagnosing economic phases based on data and adjusting the optimal investment asset ratio monthly.

New Choice Added to Conservative Retirement Pension Market

The asset management industry hopes that the investment tendencies of retirement pension investors will become more proactive through the Didim Fund. If retirement funds are managed mainly with principal-guaranteed products, preparation for old age is inevitably insufficient. If satisfaction with the Didim Fund, which pursues higher returns than savings and deposits while enhancing stability, increases, demand for more active management of retirement pensions than before may grow.

The majority of domestic retirement pension subscribers regard retirement pensions as the last safety net for old-age living and manage them mainly with principal-guaranteed products. As of the end of last year, domestic retirement pension reserves amounted to KRW 382 trillion, growing at an average annual rate of 15% over the past five years. Looking at reserves by management method, principal-guaranteed reserves account for KRW 333 trillion, or 87.8% of total reserves. Performance-based reserves are only KRW 49 trillion, or 12.8%. Since the returns on principal-guaranteed products fall short of inflation rates, this may lead to inadequate preparation for old age after retirement.

According to Kiwoom Securities, the average return on domestic retirement pensions is 2.4%, indicating a significant need for improvement when compared to Australia's average retirement pension return of 7.4% over the past five years. From 2008 to 2021, the average return on U.S. retirement pensions exceeded 7%.

Although financial authorities introduced the default option system in July last year to encourage improved returns, ultra-low-risk products are still preferred. Even after one year, awareness of the default option remains low. When dividing reserves of products approved as default option products by risk level, the proportion of reserves in ultra-low-risk products reaches 88% due to the influence of high principal-guaranteed products.