Boss, father, and a man with mission – the multiple roles of a public pension CIO
This article is the second part of a profile published in January.
To former chief investment officer (CIO) Jang Dong-hun, managing billions of dollars in assets is not about a high salary or social status.
Instead, he derives satisfaction from improving the lives of those who have placed their trust in Korea’s Public Officials Benefit Association (Poba), from which he stepped down as CIO earlier this week after two terms.
In a career spanning more than 30 years in Korea’s asset management industry, Poba was the second public financial institution that Jang had worked for. The first was the Financial Supervisory Service, where he was associate director. He joined Poba in 2015 and leaves behind an impressive track record of growing the fund to $15 billion from $6.9 billion when he started.
The responsibility of improving the lives of pensioners and retirees motivated him and his team to strive for better investment returns, which they achieved consistently in his six-year tenure, he told AsianInvestor.
The pension fund’s five-year annualised return almost doubled to 6.9% between 2015 and 2020. He attributed the success to teamwork and dedication from his team members.
REWARD AND REGRET
Having the sense of mission to serve the public is a key quality required of a public pension manager, he said.
But that does not diminish the importance of paying competitive wages to motivate performance, as he noted that salaries in the private sector are much higher than the public sector in the asset management industry of Korea.
“This kind of public pension gives me a different motivation. l work for regional public officials who work for Korean society with low compensation. I'm responsible for their retirement life and their families. It’s a very strong duty and motivation,” he said.
There are a million people whose lives depend on his work, he added. It is a very strong motivating factor – one that is different from investment managers in the private sector, he said.
When asked if he had any regrets about his time at Poba, he said he wished he could have increased the salaries of his team of 55 investment managers but was unable to because of factors beyond his control.
Jang recognised the role of incentives in keeping staff morale high and retaining talent. “But due to some structured and systematic issues, I have limited capacity,” he said, without elaborating further.
However, the investment team of Poba was able to receive decent bonuses every year during his tenure, thanks to record-breaking returns, which was not a common phenomenon before he joined.
NOT A BED OF ROSES
Despite the satisfactory returns Poba achieved through investing in alternative assets, Jang was worried about the fund’s funding ratio during the pandemic and the stock market crash in 2018.
Before Jang came on board in 2015, its funding ratio was 86.9%. During his term, the funding ratio exceeded 100% for the first time at the end of 2019 to reach 101.4%. But the onset of Covid posed a challenge to keeping the ratio intact.
“Honestly, the Covid situation was really stressful, and it gave me a lot of work burden, both psychologically and physically,” he said. “I was worried that our funding ratio would be lowered, and we may lose our capital. That really made me nervous.”
As a veteran finance professional who had been through several financial crises, he managed to calm himself and take advantage of market dislocation to find discounted deals.
He recalled holding countless meetings with his team and giving direction and encouragement to the less experienced investment managers to persevere and focus on alternative assets, despite the market volatility.
LEARN FROM THE YOUTH
To manage stress, Jang keeps to a fixed routine waking up at 5am and sleeping by 10.30pm. He brisk walks for an hour every morning near his Seoul office, listens to music and financial news to keep himself abreast of developments, and plans his day mentally before heading into the office.
Outside of work, he is a happy father of a married daughter, who works in the biggest online education company in Korea, and a younger son who is following in his footsteps in the alternatives space.
He even consults them occasionally on business ideas for their views on the latest trends. For example, when Poba was planning to invest in Korea’s franchise fried chicken brand BHC Chicken, he sought their views. “At the time, I did not have that much knowledge although I like Korean-style fried chicken… so I asked my kids ‘Well, how’s taste? Do you like it?’, as the younger generations are the main customers.”
In the first half of 2021, Poba recorded an annualised 11.8% of return, with 80% coming from the private market. It made a profit of W40 billion ($33.4 million) from a private equity fund investment in Hive, the management company of Korean boy band BTS, and W30 billion when H&Q sold its online recruitment platform JobKorea for W900 billion.
A NEW ERA
Heo Jang, former head of investment at DB Insurance will take over from Jang this week. Born in 1963, Heo Jang is a year younger.
“I have done what I can. My colleagues hope that Poba performs as it used to,” said the outgoing CIO.
Jang Dong-hun noted that the sense of dedication, the capacity to cover different asset classes, and the ability to work collaboratively were Poba’s criteria in the selection of the next CIO. About his next move, he said he was open to any opportunities in both public and private sector, in or outside Korea, as long as he can give leverage his skills and expertise.
Looking ahead, he noted that the financial industry in Korea was small compared with the manufacturing industry. He believed as the population ages, Korea’s financial industry, especially the public pension industry, would need to be more competitive globally and look for the best investment opportunities to protect the nest eggs of retirees.
“This is the mission for the next generation working in the capital market, which is also the mission for the current generation like myself,” he said. “Public or private entity, whatever it is.”