An exodus of investment talent at Seoul-based National Pension Service — ahead of the end-of-February deadline for relocating NPS staff to the South Korean countryside — could hamstring the 545 trillion won ($462 billion) pension fund's near-term efforts to deploy net inflows exceeding $4 billion a month.
Longer term, NPS' move to the rustic setting of Jeonju, a roughly three-hour drive from the capital, could hobble its prospects for assembling and retaining a world-class team to manage a portfolio set to exceed $1 trillion in assets by the middle of the coming decade, market veterans say.
The marching orders the national pension fund is following this year are part of a long-standing government effort to ease the overconcentration of the country's economic and administrative activities in Seoul.
While the policy is affecting a broad range of ministries and government-linked entities, the distance from the capital of NPS' new home has left the challenges facing the fund looming particularly large — both for its employees and the money managers at home and abroad running mandates for the fund or hoping to do so.
By comparison, the move by various ministries and quasi-government-linked funds, such as Korea Post Bank, to the country's new administrative capital of Sejong, a little more than an hour from Seoul, has been less onerous.
On top of a long-standing reputation for relatively low compensation, the move to the hinterlands will add a second strike against NPS in the eyes of current and prospective employees, market veterans say.
Offsetting those negatives, said Hyun-Chang Huh, an NPS spokes-man, in an email, is a sense of national service — with NPS staff “proud to manage the assets of the Korean people.”
On that score, some market veterans point to the shadow hanging over NPS' public image as a result of the indictment in January of NPS Chairman Hyung Pyo Moon as a further blow to employees' esprit de corp. Mr. Moon allegedly pressured NPS executives, in his prior capacity as head of the ministry overseeing the fund, to approve a 2015 Samsung Group restructuring criticized as favoring the conglomerate's founding family.
Mr. Huh said recent improvements in compensation have made the salaries of NPS employees competitive with what they can get from local money management firms. He conceded, however, that room remains for further discussion of changes to ensure the compensation system matches the expertise of investment professionals “in managing the world's third-largest fund.”
And on Feb. 28, NPS' investment management committee, chaired by the minister of health and welfare, agreed to request sufficient additional funding from the Finance Ministry to make manager compensation top quartile by private industry standards. It remains unclear at this point how the Finance Ministry will respond, an NPS spokeswoman said in a March 1 interview.