"The retirement pension market, currently around 500 trillion won, is expected to expand explosively to 1,000 trillion won within five years if the fund-type system is introduced. That would open a massive market surpassing the National Pension."
Cha Deok-young, head of the retirement pension division at Hanwha Asset Management, predicted this kind of structural shift in the retirement pension market in a recent interview with ChosunBiz.
Cha said, "Retirement pensions have long been trapped in principal-and-interest-guaranteed products, making the market relatively sidelined from the perspective of asset managers. If the fund-type system is introduced, performance-based management will take hold as the mainstream, as in advanced overseas markets," adding, "This will be a decisive turning point for asset managers to emerge as the main players in the retirement pension market."
◇ DB-type funds surge from 70 billion won to 1.5 trillion won… 'Interest rate-tailored solutions' hit the mark
Hanwha Asset Management is already showing rapid growth in the DB (defined benefit) retirement pension market. Cha said the 250 trillion won DB market, which accounts for half of the overall 500 trillion won retirement pension market, "is largely led by corporate finance teams and thus has a strong conservative management bias," explaining, "The top priority is to prevent principal loss and secure stability rather than to earn high contributions." That means demand shifts must be analyzed precisely depending on the direction of interest rates.
Hanwha Asset Management produced a stepwise lineup guidebook of 10 products that set interest rate levels and target returns as the two axes (X and Y), providing corporations with customized consulting. As a result, DB managed funds that were around 70 billion won and ranked near 15th in the industry in 2024 surged more than twentyfold to 1.5 trillion won in just one year, catapulting the company to around 3rd to 4th place in the industry.
◇ "Long-term investing hinges on 'loss defense'… Short-term herding is poison"
Amid sharp market volatility, Cha's cardinal rule for pension investing is thorough downside loss defense. Because pension accounts are effectively forced into long-term investing due to withdrawal constraints before retirement, long-term risk control that avoids losing principal is essential to maximize compounding.
Cha said, "For pension assets, the accumulation of compounding effects through long-term investing is the core source of returns, and to achieve that, the most important thing is to keep investing even during volatile phases," but added, "When volatility rises, anxiety often leads to midterm redemptions. That not only breaks compounding but also negatively affects the maintenance of pension tax benefits."
Cha particularly noted that the closer investors are to retirement, the less time they have to make up for sharp drawdowns caused by internal and external variables. She said volatility management is as important to pension asset management as boosting returns.
Cha Deok-young said, "If you lose 20% in the investment market, you do not recover your principal just because it rises 20% again," adding, "Retirement assets must not lose their opportunity from a single failure, and controlling losses over a long period is the essence of pension management."
◇ Collaboration with JP Morgan and WTW… Securing global leadership with advanced governance
Hanwha Asset Management has built a decision-making governance structure with global financial firms to avoid being swayed by short-term performance pressure and to maintain a long-term asset allocation philosophy.
For its flagship target-date funds (TDFs), the company strictly adheres to a glide path that gradually reduces the equity weight from 80% to 40% as the retirement date approaches. In particular, in working with global manager JP Morgan, it does not simply follow the global model portfolio proposed by JP Morgan. Instead, it operates a dialectical framework of "thesis–antithesis–synthesis," debating and calibrating through its own validation meetings.
Among domestic TDF managers, Hanwha Asset Management is the only firm with such an independent validation governance system, Cha said.
To gain an early lead in the fund-type retirement pension market, the company is also pursuing an exclusive collaboration with U.K.-based WTW, a global pension consulting firm. Cha said, "Through our collaboration with WTW, we will transplant advanced pension governance domestically," adding, "As regulators' evaluation criteria are shifting toward long-term stability, our adherence to principles will bear fruit in the 1,000 trillion won pension market."