What to Do with 147 Trillion Won in Retirement Pension DB Reserves... KTB Asset OCIO Seminar

원본보기 아이콘

[Asia Economy Reporter Hwang Junho] Since the enforcement of the amended Enforcement Decree of the Employee Retirement Benefit Security Act (ERBSA) on the 14th, which mandates the formation of an Asset Management Committee and the preparation of an Investment Policy Statement (IPS) for companies operating Defined Benefit (DB) type retirement pension plans, interest has grown in 'Outsourced Chief Investment Officer (OCIO) funds' where asset management companies are entrusted to manage corporate DB-type retirement pension reserves on behalf of the companies.

Korea Investment Trust Management announced on the 18th that it will hold an online seminar on the 20th to report the first quarter operation status of the 'Korea Investment OCIO Self-Managed Fund' to help investors better understand the product in this context. This fund was launched by Korea Investment Trust Management in September last year in preparation for the amended ERBSA enforcement. The seminar is designed to inform fund beneficiaries, corporate retirement pension managers, and sales staff about the product structure, operational status, and future management plans.

This fund was launched to manage DB-type retirement pension reserves entrusted to it, aiming to achieve returns exceeding the expected increase rate of retirement liabilities while reducing the financial burden on companies. Its strength lies in providing a 'Total Solution' that covers everything from setting operational goals based on analysis of domestic listed companies' liabilities, asset allocation, actual management, to post-management. Additionally, it sets realistic operational targets by utilizing the ‘Retirement Liability Index,’ developed for the first time domestically by Korea Investment Trust Management. The Retirement Liability Index estimates how much the retirement liabilities of domestic companies will increase on average over the next five years. The current target return rate of this fund is approximately 4% per annum over the next five years (based on data from May last year to April this year, net of fees).

In particular, this fund provides advanced services comparable to those of large funds to customers subscribing to the fund in preparation for the introduction of the Asset Management Committee and the mandatory preparation of the IPS. Representative services include mobile-based performance reporting, investment education, and provision of IPS (draft). The OCIO service is broadly composed of three stages: Plan, Do, and See. Given that this fund is a public offering fund receiving investments from an unspecified large number of investors, these procedures are conducted online and via mobile.

Wonseok Oh, Head of Pension Marketing Division 1 at Korea Investment Trust Management, said, "This product utilizes the Retirement Liability Index that reflects employee wage growth rates, making it specialized for companies managing DB-type retirement pension reserves to achieve their financial and institutional goals." He added, "It will be a good alternative for investors seeking stable long-term returns." Oh also stated, "The enforcement of the amended ERBSA acts as a catalyst to shift DB-type retirement pension reserves, which were practically left in principal-guaranteed products, to performance-based products such as funds, and the retirement pension OCIO market is expected to steadily grow." He concluded, "Korea Investment Trust Management will actively support clients' fund management with products and services that can achieve operational goals while responding to institutional changes in domestic retirement pensions and capital markets."

OCIO refers to a comprehensive financial service where external asset management experts are entrusted with clients' funds to manage all or part of the asset management tasks on their behalf. Retirement pension OCIO applies the OCIO concept to the management of DB-type retirement pension reserves, acting on behalf of companies to manage all or part of their retirement pension reserves.

© The Asia Business Daily(www.asiae.co.kr). All rights reserved.