Samsung Asset Management and US-based Capital Group have launched six target-date funds designed to meet retirement needs in Korea.
The firms revealed their partnership last year, stating they hoped to help tackle “demographic challenges” resulting from Korea's ageing population.
The six funds have retirement target years ranging from 2020 to 2045. Each fund invests its portfolio in 11 underlying funds managed by Capital Group in several assets classes. The funds employ a “glide path” system to reduce exposure to risky assets as the fund nears its target date.
According to a statement from the firms, assets held in target-date funds in Korea amount to just $6.6 million, compared to $760 billion in the US.
“With the Korean population’s increasing longevity and the need for income to supplement defined benefit plans, we expect target-date funds to become an important long-term retirement savings tool,” says Shaw B Wagener, chairman of Capital International, the global arm of Capital Group.
Sung-hoon Koo, chief executive of Samsung Asset Management, says the target-date funds could help to ease Korean investors' bias towards their home market, where he says 86% of domestic retirement pensions and 81% of personal pension assets are invested.
The current situation means Korean portfolios are not diversified, he says, given that Korea only accounts for about 2% of the global capital market.
The firms hope to benefit from a recent regulatory change in Korea that increased the amount retirement funds can invest in equities from 40% to 82%.
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