Reuters triggers brain drain in Korea’s mega-pension fund

Reuters. File photo: The logo of the National Pension Service (NPS) is seen on November 4, 2016 at its branch office in Seoul, South Korea. REUTERS / Kim Hong-Ji

By Cynthia Kim, Jihun Lee and Yena Park

SEOUL (Reuters) – Earlier this year, Lee quit his job managing the South Korean National Pension Fund, the world’s third-largest, after a long commute between his home in Seoul and his office in Zionzu, 200 kilometers away.

For four years, Lee lived in a studio apartment in the city of Jeonzu with 658,000 people on weekends and returned to Seoul on the weekends. She feared that her family would break up if she did not make the difficult decision to leave.

Lee Hall is one of about 140 money managers who have left the 930.5 trillion won ($ 788 billion) national pension service since 2016, shortly before moving to a dormant provincial capital, Jeonzu, as part of a move away from the capital to key government agencies. Seoul.

About half of the 320 currently operating in the fund’s investment arm, it is a worrying brain drain for major public retirement plans in Asia’s fourth-largest economy and a major investor in Korean blue-chips such as Samsung Electronics (OTC 🙂 and Hyundai Motor. Co.

“Staying in Gionzu for the weekend, I felt like I was missing out on a lot of things in my life, I couldn’t take it anymore and decided to move to Seoul,” said Lee, who now works as an asset manager in Seoul. Agrees to be identified by the financial district and its title only.

With assets worth about half of the country’s gross domestic product, NPS manages pensions for private sector workers and self-employed South Koreans.

The world’s fastest aging society has raised the stakes for managing a huge wave of retirement funds in the coming years.

In the last five years, however, NPS has filled it with only 57% of open jobs.

An NPS official said the fund partially reflected the large number of openings as investment increased but acknowledged the problems surrounding the transfer.

“While this has been much more stable than it was before our relocation to Gionzu, the manpower problem seems to have resurfaced because we have recently increased job opportunities on a large scale which has apparently increased the relative vacancy rate,” the official told Reuters. The answer to the question

“As our foreign investment expands, so do our opportunities to work abroad, and we are trying to motivate talented people to stay employed by improving working conditions, and we have talent development programs.”

To fill the staff shortage, it removed the requirement of mandatory one-year work experience for the first time from its job posting in September and began offering opportunities to work abroad, even to domestic equity fund managers.

NPS’s annual investment return for 2020 was 9.7%, down 25.15% from Japan’s GPIF in 2020 and 20.4% from the Canada Pension Plan Investment Board.

This partly reflects the more conservative nature of its investments, fund managers say, which means it is less disclosed during recessions.

However, NPS now plans to increase its foreign investment allocation from 34% in 2019 to 50% by 2024.

As of 2020, it has 30 employees across branches in New York, London and Singapore, down from 351 employees at CPPIB in Canada and 252 employees at various NBIM overseas offices in Norway, according to NPS 2020 data.

More ambitious returns will demand a deeper pool of investment talent, which has become harder to attract and retain since the transfer in 2017.

“When I was a manager there, about eight to ten applicants competed for the position of a fund manager, after we screened the inexperienced, and then the fund’s pay scale was even lower,” said Hong Chun-uk, who resigned. Position of Senior Fund Manager at NPS in 2015.

He left the fund after announcing his transfer and has since become an economist at Seoul-based brokerage.

Big money, small town

NPS is one of about 150 state-owned enterprises and public corporations that have moved out of Seoul since 2005, and plans to relocate another batch of about 100 entities, including part of the National Assembly.

The major changes were part of a government plan to decentralize economic and political power away from Seoul, reduce traffic congestion in the capital, and develop regional cities.

The struggle to play a role in the fund has sparked controversy over the ability to relocate important public institutions.

The two fund managers who left NPS say the brain drain issue has not yet adversely affected the effectiveness of the fund, but pension experts say it will.

“In Korea, families have a strong preference for living in the capital, Seoul, for school and livelihood,” said Eun Sook-muung, head of the Korean Pension Association. “Of course the political push has ignored it and inexperienced, ineligible funds will ultimately hurt its return on investment.”

For many fund managers accustomed to a certain standard of urban living, Jeonju has limitations.

“There’s a popular restaurant where I used to go often and I used to meet my boss and other people there,” Lee said. “Everyone at NPS expects colleagues to be around town.”

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