Hong Jun-young, Head of ETF Department at Mirae Asset, highlighted an increasing trend of individual investors moving away from principal-guaranteed products in retirement pensions. “It’s important to focus on representative index products from countries with long-term growth potential,” he said in an interview with the Korea Economic Daily on the 8th. He noted that investments in ETFs through retirement pension accounts have tripled to 15 trillion won, a significant rise compared to the end of 2022.
The surge in ETF investments through retirement pensions indicates a growing interest among investors in actively managing their pension funds. Since ETFs do not have sales fees, they are rarely purchased on recommendations from banks or securities firms; most investments are made directly by individuals. Hong explained that even conservative investors at banks are increasingly buying ETFs directly. The amount invested in ETFs from bank retirement accounts saw a massive jump from 400 billion won at the end of 2022 to 2.4 trillion won in the first half of this year.
What kinds of products are the “smart ants,” who manage retirement pensions via ETFs, investing in? Hong identified “U.S. representative indexes” and “emerging markets” as popular choices. Unlike general accounts, which often see investments in sector-focused ETFs like those in secondary batteries or semiconductors, retirement pensions tend to focus on stable, developed market index products like the S&P 500 or NASDAQ 100, as well as emerging markets, such as India, which are expected to have high long-term growth potential.
Additionally, Hong advised selecting ETFs for retirement investment that align well with the characteristics of retirement pension accounts. “High distribution rate products might not be compatible with pension accounts, where withdrawals are challenging,” he said. If a system for automatically reinvesting distributions is not in place or not managed personally, the cash received might simply sit idle in a retirement account.
Hong projected that the demand for ETF investments in retirement accounts will continue to grow. He anticipates growth in this area, fueled by increasing awareness of the importance of retirement fund management and the growing list of sales companies offering ETFs among available investment products.