In Focus: NPS recruitment struggles spark concerns

A scenario in which a fund had less than 55% of its targeted staff would be an issue in any organisation. However, that is the reality for the investment arm of Korea’s National Pension Service (NPS), after it moved its headquarters away from the national capital Seoul.

The world's third-largest pension fund, with W975.6 trillion ($765.6 billion) in assets under management (AUM) as of end-April 2023, should have 812 internal fund managers, according to a 2021 study by consulting firm CEM Benchmarking. released by the Ministry of Health and Welfare in June.

But as of this year, it only had 437, or almost 54%, of these fund managers, in place.

“It is urgent to improve the fund management infrastructure, considering that a higher level of management capacity is required as the size of the fund increases in the future, and that the fund return rate is an important policy tool that can reduce the burden of future generations' insurance premium hikes,” the summary stated.

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Analysing the current fund management infrastructure of the NPS, the management scale per investment professional is approximately W2 trillion. This is far short of the scale of manpower operated by other major pension funds such as Canada’s CPP Investments (W0.3 trillion) and the Dutch APG (W0.7 trillion), the committee noted.

RELOCATION TO BLAME

The lack of investment professionals at NPS is to a large extent an outcome of the decision to move the pension fund’s headquarters away from Seoul, the capital and financial hub, to Jeonju, a minor city 200 kilometres south and a three-hour drive away, a source told AsianInvestor.

Unsurprisingly, the relocation completed in 2017 led to an exodus of staff that didn’t want to move or commute to Jeonju. Furthermore, as of November 2021, over the past five years the NPS had only filled 57% of jobs it opened.

One high-ranked former investment professional at NPS said that it eventually became an issue of balancing between working most days at the NPS headquarters in Jeonju and a having family life and education options for children elsewhere.

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The investment professional emphasized the loyalty employees felt for Korea’s national pension fund, but private matters outweighed these factors causing a shift to the asset management sector. Although not a main reason, the former investment professional also pointed out that the relocation had meant some challenges in meeting external managers for NPS staff.

“Although we are the third-largest pension fund in the world, big asset manager names like Blackstone will not come down to Jeonju when their senior people visit Korea," the investment professional told AsianInvestor on condition of anonymity. "We have to come and meet them in Seoul.”

However, some asset managers have taken a proactive approach to the NPS relocation and have set up shop in Jeonju to accommodate the pension fund. In January, investment manager Franklin Templeton announced the opening of a contact office in Jeonju to strengthen its relationship and cooperation with NPS.

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