MZ Generation Transformed into 'Pension (TDF) Ants'

Significant Increase in MZ Generation TDF Inflows
Stable Returns as Well

Funds from the MZ generation, who have lost their way, are flocking to Target Date Funds (TDFs). As interest in pension assets grows, it is analyzed that many young people are turning to TDFs to secure stable returns amid the stock market downturn.

Looking at the cash inflow proportions of Shinhan Asset Management's ‘Shinhan Ma-eum Pyeonhan TDF 2025, 2030, 2035, 2040, 2045, 2050’ products on the 4th, the proportions for 2045 and 2050 have significantly expanded this year. The 2045 fund accounted for about 11.40% last year but increased to 19.84% as of the 27th of last month. The 2050 fund also recorded 8.10% last year but has grown to 14.94% currently. In the previous year, the inflow proportions for 2025 and 2030 were 28.10% and 17.20%, respectively, together exceeding 45%. However, this proportion has decreased to 36.04% this year.

The increased fund inflow into 2045 and 2050 indicates that young people in their 20s and 30s are actively investing in pensions. The numbers attached to the TDF represent the investor's retirement target year, and these products allocate investments between risky and safe assets according to the subscriber's life cycle aiming for that retirement point. For example, the 2050 fund sets a higher proportion of risky assets than the 2025 fund. Therefore, an office worker born in 1990 planning to retire at age 60 would join the ‘2050’ fund to grow their assets.

The net assets of ‘2040~2050’ TDF products across all asset management companies, including Shinhan, have also significantly increased. According to the fund rating agency FnGuide, the net assets of the 2040 fund rose from 801.8 billion KRW last year to 1.3056 trillion KRW as of the 27th, a 62.83% increase. The 2045 and 2050 funds expanded by 44.54% and 122.13%, respectively. An industry insider stated, "As pension accounts offer tax benefits and the advantages of pension products increase, interest in pension assets is growing, leading to an increase in TDF subscriptions among young investors centered on the MZ generation."

The returns of the MZ generation, who have transformed into ‘pension ants,’ can be considered favorable. The returns for Shinhan Ma-eum Pyeonhan TDF 2040, 2045, and 2050 are approximately -2.06%, 1.96%, and -2.06%, respectively. Although recording negative returns, considering that the KOSPI return was -11.37% from the beginning of the year to the 27th of last month, these are commendable figures. In particular, these TDFs have recorded higher returns than those of other asset management companies’ TDFs (top 5 companies’ average returns: -5.37%, 5.55%, -5.55%).

Given that the MZ generation is sensitive to SNS such as YouTube, Shinhan Asset Management has reorganized its pension-related organization and is actively attracting MZ generation investors. Last year, Shinhan Asset Management strengthened communication with prospective pension investors through various digital channels by establishing the Pension Digital Solution Headquarters. They also newly recruited a Global Operations Head and an Investment Strategy Center Head, completing the internalization of TDF’s own operational capabilities.

Kim Seong-hoon, team leader of the Multi-Asset team at Shinhan Asset Management, who manages this TDF, explained, "In the first half of this year, due to changes in the US Federal Reserve’s monetary policy, rising commodity prices, inflation, and geopolitical issues, volatility remains high, so we are managing the portfolio from a conservative perspective." He added, "We are trying to find assets that can generate returns when these factors stabilize."

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