'ETF Father' Bae Jaekyu Reveals TDF Investing in ETFs

'Korea Investment TDF Alseora ETF Focus Fund' Launch
Low Costs... Compound Interest Effect for Long-Term Investment
In-House 'Glide Path' Development

[Asia Economy Reporter Hwang Yoon-joo] Korea Investment Management (KIM) has launched an EMP (ETF Managed Portfolio) type Target Date Fund (TDF) that invests in Exchange-Traded Funds (ETFs). Since the product is composed of ETFs, it offers low costs, allowing investors to benefit from compound interest effects over long-term investments. In particular, by applying its self-developed Glide Path?a graph showing the proportion of stock investments until retirement?it is explained that TDFs specialized for specific professions such as doctors and lawyers can be created.

On the 6th, Korea Investment Management held a press conference at Paul's Anchor Wine Market in Itaewon, Seoul, announcing the launch of the 'Korea Investment TDF Alseora ETF Focus Fund.' This fund is based on the know-how accumulated over years of managing the 'Korea Investment TDF Alseora Fund,' created in collaboration with global pension specialist T. Rowe Price in 2016, and is developed and managed independently.

Unlike existing TDFs that invest in active funds, this fund invests in passive ETFs, which is a distinctive feature. The plan is to expand the TDF lineup through this approach.

Jae-gyu Bae, CEO of Korea Investment Management, said, "The most efficient and rational investment methods are long-term investment, diversification, low-cost investment, and installment investment," adding, "'Korea Investment TDF Alseora ETF Focus Fund' embodies all these methods."

The 'Korea Investment TDF Alseora ETF Focus Fund' is designed to deliver stable long-term performance despite repeated economic fluctuations. Based on assumptions about historically recurring markets, it analyzed over 40 years of economic indicators and derived its own Long-Term Capital Market Assumptions (LTCMA), which serve as the principles for asset allocation.

Using this, it estimated and analyzed long-term average returns and volatilities by asset class, resulting in a combination of 'U.S. growth stocks and domestic bonds' that maximizes diversification effects. It also adopted a currency exposure strategy, which offers higher expected returns relative to risk compared to currency hedging, creating a strategic asset allocation investment solution unique to Korea Investment Management.

The 'Korea Investment TDF Alseora ETF Focus Fund' pursues maximization of long-term investment returns through a '3-Low (Low Risk, Low Turnover, Low Cost)' structure characterized by low risk, low turnover, and low cost. This is why the portfolio is composed of ETFs, which are relatively low-cost investment vehicles. As the investment period lengthens, even small differences in costs can lead to significant differences in performance due to compound interest effects.

Based on lifecycle human capital analysis, it also developed an optimized Glide Path tailored for Koreans. The Glide Path, a core element of TDFs, automatically adjusts asset allocation according to the subscriber's lifecycle targeting retirement. The self-developed Glide Path precisely calculates human capital by lifecycle for Koreans using various demographic data such as income and life expectancy, along with LTCMA, optimizing it for the Korean lifecycle.

Regarding the self-developed Glide Path, Hyo-jin Lim, Multi-Asset Management Department Manager, stated, "We meticulously designed the Glide Path to compensate for the decrease in human capital (income) as one ages with financial assets," emphasizing, "We made it possible to personalize the Glide Path by reflecting social structural changes and the characteristics of special professions such as doctors and lawyers."

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