A Korea-based investment manager has focused its attentions on the retirement planning needs of its home market.

Samsung Asset Management has teamed up with Los Angeles-headquartered Capital Group to launch six Korean target date funds, which have an asset allocation programme based on expected retirement dates.

The launch comes after Samsung's partnership agreement in October to cooperate with Capital Group in developing asset management products for the Korean market.

A target date fund typically pursues a long-term investment strategy, using a mix of asset classes that is adjusted to become more conservative over time, moving for example from growth-oriented equities to income-oriented equities. The six Samsung TDFs will comprise 11 different underlying funds, managed by Capital Group. They will have retirement target years of 2020, 2025, 2030, 2035, 2040, and 2045, and will be actively managed 30 years past retirement so investors can use a single fund for their entire lives.

Key factors taken into consideration in the funds' asset allocation process will be retirement age, life expectancy, wage growth rates and the average age of entry into the workforce.

The five-year percentile rankings for Capital Group's American Funds TDFs are in the top 1 per cent, according to Morningstar, as of 31 December 2015. The size of the market for TDF products in the US, which were introduced during the mid-1990s, has grown to over $760 billion, according to the Investment Company Institute. In comparison, the Korean TDF market has KRW7.5 billion (around $6.6 million) in assets under management. Here, the proportion of retirement funds that investors can allocate to equities recently increased from 40 per cent to 82 per cent.

“If we look at the current retirement pension market in Korea, products with guaranteed principal and interest represent 89.2 per cent. In the case of personal pensions, the proportion of insurance-type products is 76 per cent,” said Sung-hoon Koo, chief executive of Samsung Asset Management.

“Moreover, even though the Korean market is only 2 per cent of the global market, 86 per cent of retirement pensions and 81 per cent of personal pension assets are invested in the domestic market. In the current environment of low interest rates and low growth, these investments will not be able to support the retirement needs of Koreans through stable income with appropriate diversification.”

Samsung Asset Management, part of Samsung Life Insurance, has $165.7 billion in assets under management.