Retirement pension funds are flowing heavily into the stock market amid mounting concerns over an overheated rally, as the KOSPI surpassed the 8,000 mark for the first time.
Combined retirement pension assets — covering defined benefit (DB), defined contribution (DC), and Individual Retirement Pension (IRP) accounts — at the five largest brokerages reached 107.9565 trillion won in the first quarter of this year, according to the Korea Financial Investment Association on Tuesday. The figure marks a 37.3% jump from a year earlier. The brokerages include Mirae Asset Securities, Korea Investment & Securities, NH Investment & Securities, Samsung Securities, and KB Securities.
More striking than the asset growth itself is the shift in the nature of the fund flows. DB-type assets, which are managed by employers and primarily allocated to principal-and-interest guaranteed products, edged up just 0.4% over the past year. By contrast, DC-type assets, where subscribers build their own portfolios, surged 56% in the same period. The trend signals a sharp pivot in retirement pension management from capital preservation toward aggressive return-seeking.
The funds are concentrating on Samsung Electronics and SK hynix, collectively dubbed "Samsung-Hynix." Brighter outlooks for memory chip demand driven by the spread of artificial intelligence (AI) are pulling pension account buying into the two stocks.
Launches of exchange-traded funds (ETFs) holding the two stocks are also lining up. Some bond-mixed and covered-call structured ETFs are classified as safe assets under retirement pension rules, allowing the entire pension portfolio to be allocated to them regardless of the 70% cap on risk-asset investment — a factor cited as fueling the inflows.
Reports of high-return cases are stoking investor sentiment. According to a private banker (PB) at one brokerage, a retired client who invested about 1.1 billion won in SK hynix last year is said to have built the holding into roughly 18 billion won this year. A Japanese investor who recently posted on social media about earning around 9.6 billion won from SK hynix investments also drew attention. The investor said there was room for further upside in terms of valuation.
With perceptions spreading that 2-3% guaranteed-return products cannot even hedge against inflation, retirees are increasingly leaning toward equities to grow their assets. AI industry professionals argue that investors should bet on the broader industry's growth trajectory rather than worry about short-term volatility, citing expanding demand for memory chips.
But warnings over an overheated market are also growing louder. Even bellwether semiconductor stocks remain high-risk assets at their core. A strategy of concentrating retirement living funds in a narrow group of stocks could lead to irrecoverable losses if the market turns.
In the financial investment industry, the longer the bull run continues, the stronger the narrative becomes that long-term holding is the answer. But some argue the original purpose of retirement pensions — securing post-retirement living stability — should not be overlooked. Warnings are also being raised that yield-chasing herd investment could deliver a heavy blow during a market correction.
