"Even an asset manager without an affiliated retirement pension provider will ultimately be chosen by customers if it delivers results."
In Korea's target date fund (TDF) market, KCGI Asset Management is creating a surprise. Recently, the net worth of the "KCGI Freedom Qualified TDF" series topped 1 trillion won. It is the first among asset managers without an affiliated retirement pension provider and also a first as an independent asset manager.
The growth is explosive. The KCGI TDF series' net worth jumped more than threefold from 336.2 billion won at the end of last year to 1.007 trillion won on the 2nd. While the domestic TDF market grew 39% during the same period, KCGI rose 200%. Major vintages such as TDF2050, 2045, and 2040 mostly stayed in the top tier for returns over each period, driving inflows.
A TDF is a life-cycle fund that automatically adjusts the equity and bond mix to match an investor's expected retirement date. Subscribers choose a vintage aligned with their retirement date, and the asset manager then handles asset allocation and rebalancing. As the retirement pension and individual pension markets have expanded recently, it has established itself as a representative long-term investment product.
Kang Young-su, head of global investments at KCGI Asset Management, cited "long-term performance" as the reason for surpassing 1 trillion won in assets. Kang said, "The fact that funds came in without affiliate support means investors chose us solely on ability," adding, "There is a clear trend of money moving to managers whose performance has been verified over three years or more rather than short-term returns."
The numbers back this up. According to FnGuide, KCGI Freedom Qualified TDF2050 ranked first or second among peers for returns across all periods from the past three months to five years, while the flagship 2045 ranked first for returns over three months, six months, one year, three years, and five years. The 2040 and 2035 also placed first or second in most periods, continuing stable long-term results.
◇ Differentiated with a "Korea-style glidepath"… strong demand from retirement pension investors
KCGI highlights its "Korea-style glidepath" as a differentiator from other managers. Unlike many domestic TDFs that use foreign managers' asset allocation models, it designed its own by reflecting Koreans' average retirement timing, the national pension payout structure, and age-specific saving capacity. The company said it focuses on boosting risk-adjusted performance by considering not only long-term returns but also volatility, maximum drawdown (MDD), and the Sharpe ratio.
Its management structure is also unique. While many TDFs take a fund-of-funds approach using global ETFs, KCGI uses actively managed in-house mother funds to increase agility in asset allocation. Kang cited this as KCGI TDF's greatest competitive edge.
Kang said, "If an asset class in the mother fund underperforms, we can immediately identify which country, industry, or stock is the problem," adding, "The strength of active management is the ability to quickly diagnose the cause and, if needed, adjust even the asset weights."
When market volatility rises, it also actively uses tactical asset allocation. While maintaining the overarching principle of reducing risky assets as retirement nears, it may realize some gains or adjust asset weights even midquarter if markets move faster than expected.
Kang said, "In years like this, when Korea's stock market has risen faster than expected, we responded by realizing some gains and shifting to other assets," adding, "Rather than following the glidepath as-is, flexibly managing to match market changes is what sets active TDFs apart."
A shift in retirement pension investing culture was also cited as a reason for the recent acceleration in inflows.
In fact, about 85% of the KCGI Freedom Qualified TDF series' inflows came through retirement pension accounts. The 2050 vintage in particular has the largest share. The company sees this as demand from office workers in their 30s and 40s seeking to increase equity exposure flowing into TDFs with verified long-term performance. The fact that qualified TDFs are not subject to the 30% cap on risky assets within retirement pensions also contributed to recent inflows.
Kang said, "In the past, many people managed their retirement pensions like deposits, but recently there has been a sharp rise in investors seeking to raise equity exposure over the long term," adding, "There is a growing tendency to choose products with verified long-term performance rather than chase short-term fads."
◇ The biggest investment asset is time… pension investing is the process of creating long-term compounding
For office workers in their 30s, "time" was highlighted as the biggest investment asset above all. The explanation is that steadily investing, rather than waiting for a deeper market drop or frequently changing strategies based on short-term returns, produces better results over the long term.
Kang said, "Many investors hold cash waiting because they think the market will fall further, only to miss the rebound when it starts," adding, "Pension investing is not about calling the market's short-term direction but about using long time horizons to create compounding."
He added, "A TDF is a product where the manager handles asset allocation and rebalancing so investors don't have to constantly agonize over 'how much stock to hold now' or 'how much to keep in bonds.'"
Finally, he stressed that the core of TDF management is not short-term return competition but taking responsibility for subscribers through their retirement date.
Kang said, "The biggest difference between investing started in one's 30s and investing started in one's 50s is not management skill but time," adding, "Starting even a day earlier and continuing to invest steadily without being swayed by market volatility ultimately leads to the best outcomes."
He added, "The investment division also manages with the mindset of taking responsibility for subscribers' retirement assets 20 to 30 years down the road," and "We will continue to focus on creating pension products that earn long-term trust rather than short-term performance."