Target Date Funds: Current Status and Issues

ABSTRACT

Target date funds (TDFs) have their portfolios periodically adjusted according to the retirement dates of fund subscribers and are generally composed of several funds. TDFs attract attention in the recent pension market due to the increasing role of private pensions, the concern about the depletion and financial instability of the National Pension Fund, increased interest in stock and fund markets after COVID-19, and the introduction of the retirement pension default option. In particular, target date funds seeking globally diversified investment strategies could change the irrational investment behavior of pension assets that are still mainly invested with principal and interest-guaranteed products and consequent low returns. To this end, this study examines the current status and issues of TDF in the United States and Korea, and proposes ways to develop domestic TDF in the right direction. © 2022, Korean Securities Association. All rights reserved.