"Expecting ETF Demand Expansion with Default Option Implementation in July"

[Asia Economy Reporter Hwang Yoon-joo] An analysis has emerged that the default option system for retirement pensions, which will be implemented from July this year, could become a stable demand source for domestic Exchange-Traded Funds (ETFs).

Jeon Gyun, a researcher at Samsung Securities, stated on the 18th, "The introduction of the default option will promote the growth of domestic Target Date Funds (TDFs)," adding, "Domestic ETFs are also expected to secure a stable demand source as investment targets of TDFs."

From July this year, the default option system will be implemented according to the amendment of the Employee Retirement Benefit Security Act. The default option is a system that selects investment products through a pre-designated management method even without the subscriber's operational instructions. Before the system was implemented, management was mainly focused on savings and deposits. Because of this, the low returns of retirement pensions at the time of retirement have been pointed out as a chronic problem.

Researcher Jeon explained, "The default option operates by investing in 'funds suitable for long-term investment' designated in advance to improve the returns of retirement pensions," adding, "The scope of the default option includes TDFs, long-term value appreciation pursuit funds, MMFs, and infrastructure funds."

Jeon analyzed, "The domestic TDF market reaches a scale of 10 trillion won, and with the growth of the retirement pension market and the introduction of the default option, the growth rate is expected to double in the future."

In the United States, which first introduced the default option system, the asset size is increasing in line with the growth of the retirement pension market. As of the end of 2021, it reached 1.8 trillion dollars.

Jeon predicted, "ETFs are highly likely to be used as investment targets of TDFs due to liquidity, transparency, and low costs," and "The introduction of the default option for retirement pensions is expected to secure growth momentum for domestic TDFs and establish a stable demand source for the domestic ETF market."

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