SEOUL, Sept. 3 (Korea Bizwire) — The South Korean market for so-called target date funds (TDFs) has been growing fast this year amid growing worries over post-retirement life, a market tracker said Friday.
According to FnGuide, 70 TDF products with a net asset value of 1 billion won (US$890,000) or more had a combined 1.21 trillion won under their management as of Thursday, up a little over 530 billion won from the end of last year.
An investment vehicle designed for post-retirement life, TDFs aim to provide subscribers with a stable investment solution that automatically resets the asset mix in its portfolio according to the target date, usually retirement.
The increase is striking in light of the fact that the amount of money deposited with domestic stock funds decreased by nearly 340 billion won over the cited period.
The top performer among the vehicles is a fund operated by Samsung Asset Management Co. that recently saw the amount of money under its management exceed 100 billion won.
This year’s rapid growth was ascribed to escalating concerns over the state pension fund running dry and the country’s quickly aging population.
The latest studies by the National Pension Service, the state pension operator and the country’s top institutional investor, showed that the national pension is expected to rack up a shortfall starting in 2042, resulting in the scheme drying up earlier than expected.
South Korea became an aged society in 2017, with the ratio of people aged 65 and older hitting 14 percent of its 50 million population. Asia’s fourth-largest economy is also projected to become a super-aged society in 2026, with the figure topping 20 percent.
The local TDF market drew little interest from investors for years since its introduction in 2011. But the tide started to turn in 2016 as local asset management companies scrambled to sell products.