[Retirement Pension Investment Strategy]⑤ "Not a Short-Term Game... Concerns Over Overheated Return Expectations"

Choi Jongjin, Head of Retirement Pension Innovation at Korea Investment & Securities

Risk Management, Long-Term Returns, and Rebalancing Are Key

The Best Investment Strategy Is to Start Early

"AI-Driven Portfolio Service to Be Launched"

"Retirement pensions are not a short-term return game. Especially in times like these, index-focused management is necessary."

Choi Jongjin, Head of the Retirement Pension Innovation Division at Korea Investment & Securities, stated in a recent interview with The Asia Business Daily, "When it comes to pension investment, risk management, long-term returns, and rebalancing are essential," emphasizing this point.

As the domestic stock market thrives and forecasts for the so-called ‘Manspi’ (KOSPI surpassing 10,000 points) continue to emerge, Choi highlighted 'asset allocation based on risk management' as a key strategy for retirement pension investment. He said, "The best strategy is to start early, but you can't help but feel uneasy when investing for the long term," adding, "Since this is not a short-term return game, asset allocation is necessary."

He also expressed caution regarding the sharp increase in market expectations, as the KOSPI surged from around 3,000 points to the 8,000-point level in the past year. Choi pointed out, "Expected returns have become excessively high," and noted his concern that "portfolios could be becoming overly concentrated."

He stressed, "You need to play the compounding game in the long run, but there are areas that require management," and emphasized the importance of index-focused management, especially during a stock market boom. He added, "Steady returns are more important than being exposed to excessive volatility." For example, even with exchange-traded funds (ETFs)—the most preferred category among retirement pension subscribers—he explained that it is better to pay attention to index ETFs rather than focusing solely on stock theme ETFs.

Currently, ETFs remain by far the most popular product category among subscribers. At Korea Investment & Securities alone, ETFs have accounted for 80% of the net increase in retirement pension accounts this year, indicating a clear rise in the proportion of ETF investments within retirement pension portfolios. This is attributed both to strong demand for equity-type ETFs amid the domestic stock market boom and to the increasing number of people transferring their pension assets to securities firms that allow real-time ETF trading.

Choi also addressed the phenomenon of accelerated 'money moves' to brokerages following the implementation of the retirement pension in-kind transfer system, stating, "It certainly acted as a catalyst," and evaluated it as "the right direction to go." He pointed out that "pension system improvements fundamentally consider the capital market," and criticized the structure of low returns in the domestic retirement pension market. He went on to say, "Principal-guaranteed products are not the answer," and stressed, "A win-win structure is needed to grow both pensions and the capital market."

He further emphasized the need to expand workers' choices in order for the Korean retirement pension market to become as established as the 401(k) system in the United States. He said, "Workers should be able to choose their service providers, but this is currently blocked," and argued, "Now is the time to return the right to choose both providers and products. There is a need to move toward an open-type policy." In the current system, where companies designate the retirement pension provider, customers cannot choose a securities firm with strengths in asset and portfolio management even if they want to.

Choi noted, "There is research showing that 93% of retirement pension investors continue to stick to the asset allocation portfolio they initially selected. This is a frightening fact," and highlighted the need for rebalancing in line with market conditions. As the retirement pension market shifts from a 'maturity management' trend to 'asset management,' these rebalancing and portfolio management capabilities are becoming core competitive strengths for securities firms. He cited global asset allocation and portfolio management as key strengths of Korea Investment & Securities, and expressed confidence in 'My Super,' the company's flagship retirement pension default option product. 'My Super' is characterized by its aggressive inclusion of U.S. growth stocks, gold, and other alternative assets.

This year, Korea Investment & Securities has presented 'advancing pension infrastructure' as its main retirement pension-related task. The plan is to strengthen the overall pension infrastructure—including organization, systems, products, asset allocation, and education—to expand customer services. In the third quarter, the company also plans to launch a portfolio service utilizing artificial intelligence (AI). Choi said, "The retirement pension market is moving beyond money moves to 'people moves.' We are thinking hard about how best to serve our clients and focusing on volatility management-centered services."

This content was produced with the assistance of AI translation services.