Mirae Asset Global Investments Co. is set to introduce the world’s first passive target-date exchange-traded fund (ETF) this month to attract retirement savings with high expected returns in the early years and low fees, according to financial industry sources on Tuesday.
The South Korean asset manager will list the target-date fund (TDF) on the Korea Exchange around mid-March under the name “TIGER TDF 2045,” said the sources.
It will invest 80% of its assets in the S&P 500 index and 20% to short-term South Korean bonds, with allocations adjusting automatically over time based on a predefined glide path. Glide path refers to a formula that defines the asset allocation mix of a TDF, based on the number of years to the target date.
It is set to become the world’s first passive TDF traded on the stock exchange. Unlike traditional TDFs, which rely on active management for asset allocation, the TDF ETF will follow a passive strategy.
Assuming a 2045 retirement date, it will reduce its S&P 500 exposure by one percentage point per year until 2040, shifting the difference into domestic short-term bonds.
From 2041 onward, equity exposure will decrease by five percentage points per year, reaching 39% by 2045, with bonds making up the remainder.
From 2045, no further portfolio adjustments will be made, ensuring a stable income for retirees.
One of its key appeals is its low fees. It will charge an annual fee of 0.19%, less than one-third of the 0.75% fee on Mirae Asset’s active TDF ETFs.
BEYOND REGULATORY LIMIT
Under South Korean pension regulations, at least 30% of retirement assets must be allocated to low-risk investments like bonds, capping equity exposure at 70%.
However, TDFs, designed as qualified TDFs by authorities, are exempt from the rules as long as their equity allocation remains below 80% and adjusts over time.
As an example, if a retirement account’s portfolio consists of 70% in the S&P 500 ETF and 30% in Mirae Asset’s TIGER TDF 2045, investors can effectively increase their S&P 500 exposure to 94%.
This is because the TIGER TDF 2045 can allocate up to 80% of its assets to the S&P 500, adding an extra 24% more in exposure beyond the regulatory limit.
By Su-Ji Na
suju@hankyung.com
Yeonhee Kim edited this article.
