More than a year after South Korea's National Pension Service moved to the countryside, in line with a broader government push to ease overconcentration in Seoul, the giant fund has yet to prove it can attract and retain a top-flight investment team in its new setting.
With the 634.6 trillion won ($561 billion) fund's CEO, Kim Sung Ju, predicting NPS' fast-growing portfolio will reach 1,000 trillion won by 2021, money management executives say this could prove an unfortunate moment for the fund's investment leadership to be in disarray.
Mr. Kim couldn't immediately be reached for comment.
Among big public funds in the region, NPS has been relatively innovative in pursuing investments in areas such as alternatives. But amid the internal turmoil since the fund relocated to Jeonju, three hours south of the capital, its capabilities have declined significantly, said one investment consultant in the region, who declined to be identified.
The head of client service with one of NPS' external managers, who likewise declined to be named, said the fund retains significant strengths, and its day-to-day operations are proceeding smoothly.
The concern is more whether, with NPS' leadership in considerable flux, the fund can remain as innovative in adapting and reacting to changing market cycles, the client service head said.
On that front, NPS was ahead of the curve three or four years ago — compared to other big public funds in the region, such as Japan's ¥156.4 trillion ($1.4 trillion) Government Pension Investment Fund and Taiwan's NT$4.097 trillion ($133.4 billion) Bureau of Labor Funds — but over the past year "that's changed a lot, dialed down quite a bit," he added.
NPS' last chief investment officer, Kang Myoun-Wook, resigned a year ago, soon after the NPS investment team's February 2017 relocation to Jeonju.
On July 4, Mr. Kang's acting successor, NPS' head of global private markets, Cho In-sik, announced he would leave the fund, opening another hole in a leadership lineup already lacking heads of domestic equities, global public markets and global alternatives.
A spokesman for the fund on July 18 said NPS filled those openings for now, with the fund's reduced pool of senior executives taking on double duties until permanent replacements can be found.
Executives wearing two hats as of this month are:
Lee Soo-Cheol, the fund's head of investment strategy, has taken on the role of acting CIO as well, while a search launched on July 5 for a permanent CIO is underway.
Lim Hyeong-Ju, the head of NPS' global equity external management team, assumed Mr. Cho's other role as interim head of global private markets.
Kim Jong-Hee, NPS' head of domestic fixed income, also will serve as acting head of domestic equity.
The NPS spokesman declined to comment on the impact investment team turnover is having on the fund's ability to put net inflows exceeding $3 billion a month to work.
But if recent turnover has pinched NPS' operations, the fund's latest results offered no hints of distress. NPS' annual report for 2017, released on July 6, showed the fund delivering a 7.26% return for the year, its best showing since 2010, helped by growing allocations to equities, alternatives and overseas markets.
No going back
Even if NPS continues to struggle in recruiting talent to its leadership team, market watchers see little chance of the move to Jeonju being reversed.
This was but one of many highly political decisions made with the backing of South Korea's ruling and opposition parties alike, said the investment consultant, noting CEO Mr. Kim, previously was himself a former Democratic Party member of the National Assembly and a native of Jeonju.
Some observers insist there's no reason the move to Jeonju should prove a permanent stumbling block for the fund.
Staff departures have paved the way for rapid career advancement for some NPS investment professionals and that has left several more than willing to put up with the dual-home existence required — living in Jeonju during the week and returning to Seoul, where their children can get first-rate educations, on the weekends — said the client service head.
If top level vacancies at NPS now are raising concerns about the fund's near-term direction, a more pertinent issue could be the difficulty of providing long-term direction due to the two-year contracts the fund's CEO and CIO are given as executives at government-linked entities in South Korea, said Andrew Shin, Seoul-based head of investments with investment consultant Willis Towers Watson PLC..
Changing the rules to give those leaders five-year stints, for example, could do more to promote long-term planning at the fund, Mr. Shin said.
Meanwhile, market veterans said the comings and goings on NPS' investment team have, in some ways, favored existing managers, as the process of hiring new managers has become more drawn out.
Over the past year, NPS has made more allocations to offshore equities than fixed income, and quantitative equity managers in particular have been seeing steady top-ups, managers said.
The fund's list of 48 external equity managers includes Boston-based Acadian Asset Management LLC and PanAgora Asset Management Inc.; Philadelphia-based AJO LP; West Palm Beach, Florida-based Intech Investment Management LLC; and Chicago-based LSV Asset Management.