Expanding Scope of 'TDF'

About 1 Trillion Won Funded in One Year
12 Products Launched Including Meritz Asset Management

[Asia Economy Reporter Minji Lee] The target date fund (TDF) market, which allocates assets according to life cycle stages, is seeing a remarkable inflow of funds. With about 1 trillion KRW raised in just one year, the asset management industry is paying close attention to the rapid growth of the TDF market.

According to financial information provider FnGuide on the 19th, the net asset size of TDFs, which was only around 100 billion KRW in 2016, reached 4.0823 trillion KRW as of the 16th. Based on the amount set, it was 3.2975 trillion KRW, a 38% increase from 2.4 trillion KRW a year ago.

TDFs are funds that allocate assets according to portfolios created based on life cycle stages, targeting the retirement date. For example, if a fund name includes 'TDF2055,' it means the retirement date is set for 2055, and the proportions of stocks and bonds are automatically adjusted every year. As the year 2055 approaches, the stock proportion is reduced to pursue stable management.

With the prolonged low-interest-rate environment in the 1% range, investors seeking to prepare retirement assets stably are turning to TDFs. Demand has increased for raising returns through stock investments, moving away from principal-guaranteed products such as fixed deposits or repurchase agreements (RPs). The inflow of investors whose retirement dates are approaching has also been notable. Looking at the periods with the largest increase in fund size over the past year, they are 2025, 2030, and 2035. Over the past year, the 'Mirae Asset Strategic Allocation TDF2025' attracted the largest amount of 205.1 billion KRW, and about 78 billion KRW flowed into 'Mirae Asset Strategic Allocation TDF2030.'

Researcher Kim Hoo-jung of Yuanta Securities explained, "Since 2015, regardless of the stock market situation, the scale of funds flowing into TDFs has been on the rise," adding, "Because TDFs can only be invested in through funds, steady inflows have continued this year alongside public funds in the fund market."

As demand increased, many asset management companies have entered the TDF market. Mirae Asset Global Investments first launched a TDF in Korea in 2011, followed by Samsung Asset Management in 2016 as the second. Currently, a total of 12 asset management companies offer products in the market. On the 23rd, Meritz Asset Management will launch a TDF. It attracted attention by directly managing and selling TDFs using purely domestic fund managers. This contrasts with the previous trend where most asset managers collaborated with overseas firms to construct the asset allocation curve (glide path) considering retirement dates.

Among asset managers, Mirae Asset Global Investments maintains the top position in returns. Comparing one-year returns based on TDF2045, Mirae Asset's 'Mirae Asset Strategic Allocation TDF2045' posted the highest return of 17.31%. It was followed by 'Korea Investment TDF Alseora 2045' at 15.2%, 'Samsung Korean Style TDF2045' at 12.6%, 'KB On Gukmin TDF2045' at 11.2%, 'Hanwha LifePlus TDF2045' at 9.5%, and 'NH-Amundi Hanaro TDF2045' at 8.7%.

The market expects that if a default option (automatic investment system) is introduced to allow investment in performance-based products, the growth of the TDF market could continue. Although investors in the domestic retirement pension market are shifting interest from principal-guaranteed to performance-based products, the institutional framework has not yet been established. John Lee, CEO of Meritz Asset Management, said, "If the path for stock investment in retirement pensions opens, this market could grow to 600 trillion KRW within the next five years," adding, "Since funds automatically adjust stock proportions for investors who find investing difficult, TDFs are also an attractive investment destination for investors seeking asset allocation."

This content was produced with the assistance of AI translation services.