Performance, not term limits, must determine the longevity of the top officials guiding Korea’s major investment institutions. The latest merry-go-round has been at the National Pension Service, the nation’s $450 billion flagship retirement fund, which has just named a new chief executive and is busy choosing another chief investment officer.

Until the political culture changes, NPS staff, members and external managers can expect more organisational chaos and a discount on investment returns.

Its supervisory ministry, Health and Welfare, is reining in the relatively independent NPS Fund Management Centre, the unit responsible for managing its assets. This has triggered internal disputes and led to a wholesale change in senior management.

As a result, NPS FMC is on its seventh chief executive since its 1999 founding (NPS itself dates back to 1987). Compare this with the longer tenures for leaders at other major investment funds:

No such lengthy tenure exists among Korean institutions, even when the CEO or CIO is regarded as having performed well. Scott Kalb’s three-year contract at Korea Investment Corporation (KIC) was not renewed, despite broad market agreement that he had been a dynamic and effective leader.

Across the country’s state-linked investment funds, the government culture requires top appointees be tethered to contracts of just two or three years in length. Such habits go back a long way and is an inheritance from Japanese management tradition. The constant revolving door was meant to protect against corruption and the entrenchment of personal interests. But if media reports about the recently departed head of KIC are to be believed, this practice hardly precludes improper conduct.

Ultimately, Korea – and, for that matter, Japan – is a modern, developed economy that requires modern, developed management for its institutions. That means relying more on performance to determine whether contracts should be renewed, rather than automatically switching gears whenever there is a new election or a CIO’s term expires. It also means fostering a free media, transparency and good governance to combat corruption.

Korea’s rotation system for senior managers is holding back the development of professional leaders with institutional or market specialist knowledge, and fostering a bureaucracy that is motivated by short-term career risk. (One-year returns at NPS trailed those at the Future Fund and NBIM; Calpers had a poor 2014 but earned 18.4% the previous year; Adia doesn’t release short-term results.)

The system also buttresses the political nature of NPS investments. NPS owns more than 5% of shares of nearly 200 Korean companies, including influential stakes in Samsung Electronics, Hyundai Motor and Posco. NPS is often accused of using its voting on company board decisions to serve government wishes rather than to promote better corporate governance or to maximise investment returns.

A more independent, longer-term management team, incentivised by risk-adjusted returns over three- or five-year horizons, would make the NPS a better corporate citizen as well as improve returns for its members.

The fear that the CIO role at NPS will be mainly political has reportedly discouraged some qualified people from applying for the job. Another likely discouragement is the government push to relocate the NPS, including its fund management unit, to Jeonju, a small city in the south. This is part of a broad state push to boost local economies; but finding finance talent is hard enough in cosmopolitan Seoul.

The CIO is a powerful figure and it’s not clear who will end up with the most influence – him or the CEO. The shortlist includes candidates with plenty of investment experience at public funds. But there is no question about the provenance of the new CEO: Moon Hyung-pyo is a former Health and Welfare ministry official. He’s an unlikely candidate to push for institutional reform.

Until the government ends its obsession with short-term management contracts, Korea’s state funds will never develop the professionalism and expertise to match peers in other developed countries. Their performance will remain too correlated to short-term career risk, rather than to financial markets. That is a huge disservice for all Korean citizens who depend on the NPS for income security.