Target-Conversion Fund Sales and Timeline Shifts
Target-conversion funds raise capital for a set period, invest primarily in equities, and automatically shift holdings into safe assets like bonds once a predefined target return is reached, managing the portfolio until maturity. Total fund setting amounts climbed from 1조4000억원 in 2024 to 5조2000억원 last year, reaching 3조2000억원 in the first half of 2025, according to FSS figures cited by Money Today.
The operational window required to hit target returns and transition into safe assets shrank dramatically. While reaching the target took an average of 249 days in 2024, the duration dropped to 105 days in 2025 and accelerated further to 57 days during the first half of the year.
Fee Structure Mismatch and Investor Costs
Despite the much shorter investment cycles, investors continued to choose fee structures tailored for medium-to-long-term holding periods. According to FSS data, 71.8% of investors subscribed to Class A funds, which charge upfront sales commissions (front-end loads) while applying lower ongoing annual sales fees, making them cost-effective only for long-term investments.
By contrast, Class C funds omit upfront sales commissions in favor of higher annual sales fees, making them cheaper for short-term holdings. An FSS official noted that total fee costs for Class A and Class C typically equalize after two years, meaning front-load structures can disadvantage investors whose funds convert and mature rapidly, as reported by Money Today.
Target Returns Versus Realized Final Returns
Regulators also cautioned that target returns represent goals rather than guaranteed outcomes. Rapid target achievement during a booming market can reverse if market conditions deteriorate during the subsequent safe-asset conversion phase, leading to situations where final returns fall significantly below the initial target percentage, according to the FSS.
To address these risks, the FSS plans to introduce a revised standard for fund core investment risks by the end of the month, requiring clearer disclosures regarding principal loss risks and asset conversion mechanics in fund registration statements.
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