After two tenures, AsianInvestor's 2021 Standout CIO Jang Dong-hun looks back on the past six years at Korea's Poba with satisfaction.
The seminarÆs speakers stressed the value of long-term investment and the acceptance of short-term volatility û a way for NPCÆs managers to further their case for global diversification. It was also an opportunity for NPCÆs management to show they are doing a good job.
Why this is important became clear earlier this week, when the main body responsible for regulating the NPC, the Ministry of Health & Welfare (MoHW), publicized a proposal to amend the National Pension Act of 1988 which launched the NPC (although work got underway in 1997, hence the 20th anniversary, although the NPCÆs management may have reached for this in order to hold the seminar now).
That change would see the NPCÆs fund management unit spun off into a separate state-owned corporation, still dedicated to running the NPCÆs assets but on a more professional basis. This would entail both remunerating NPC executives along private-sector lines, to promote risk taking rather than asset administration, as well as slimming down its investment management committee and board of directors to only include investment experts û and with enough seats under MoHWÆs sway to ensure its domination of the NPC.
There will now be a period of public consultation, which will lead to this proposal being put on the agenda of the Blue House û the President and his cabinet. ôThat meeting will be a dog fight,ö says one person familiar with the situation. Both the Ministry of Finance & Economy (MoFE) and the Economic Planning and Budgeting office of the Blue House are expected to engage in a fight over the pension fund. Although these groups also agree in principle that the NPCÆs investment management should be spun off and its board of directors streamlined, they will resist losing influence over the nationÆs biggest cash cow. The revised capital structure and governance framework will also be contested.
In the past few years, the NPCÆs management has become fairly independent and bold. For example, the NPC has expanded into global equities, private equity and real-estate investments, and is now looking to add infrastructure funds. It is also working with MoHW to lift restrictions on its use of derivatives, so that it may invest in hedge funds. The NPC has also pushed responsible investment such as the mandatory use of proxy voting and it plans to adopt global investment performance standards (Gips) for investment performance measurement and presentation.
But politicians and bureaucrats still try to use the fundÆs money for purposes other than sticking to its goals of accumulating capital for retirees. For example, on 16 October, MoFE announced the government is using $4.4 billion of NPC assets to bolster South KoreaÆs sagging stock market.
Indeed, sources say the NPCÆs executives have resisted the idea of being spun off, despite the apparent gains of professionalisation, if it means that a smaller investment management committee or board of directors is dominated by individuals with their own agenda.
The current investment management committee has 21 members and the MoHW proposal would have this whittled to nine. This has already sparked howls of outrage from labour unions and civil rights activists, who would be kicked off the committee because they are not æexpertsÆ at investments. While NPCÆs managers often battle to get their technocratic views accepted, they also appreciate the fact that a broader investment committee lends itself to transparency. People close to NPC say a smaller board of investment experts, but one in which a single ministry can have ultimate power, may not be in the interests of the fundÆs members.
Following any decision by the presidential cabinet, a proposed change to the National Pensions Act would have to go to the National Assembly, at which point more parties will have their chance to influence the move. Korea will have a presidential election in December 2007 and National Assembly elections in April. This means the cabinet is unlikely to make any decision until next year, and the National Assembly wonÆt see a legislative proposal until summer 2008 at the earliest. But NPC executives have reluctantly agreed to support the change because they sense the political reality is that NPCÆs fund management unit will be spun off, according to sources familiar with the situation.
Brunei Investment Agency names head of real estate; Former Temasek CEO Ho Ching joins EQT Future's mission board; APG managing director for global real assets relocates to Hong Kong; Manulife Hong Kong appoints chief financial officer and chief product officer; Wayne Swan commences as Cbus chair; AXA IM appoints head of client group alts Asia; and more.
Census experts say China's population will start to decline at least five years earlier than expected - investors are being warned to keep a weather eye on inflation and structural shifts.
Family offices in Hong Kong want to do more impact investing, but the paucity of ESG talent and the lack of uniform reporting standards are real issues for them.
An impending series of interest rate increases and the deterioration in relations between Russia and the West over Ukraine have worried investors in recent weeks, hence the volatility in US equities in particular.