Cynthia Kim, Jihoon Lee, and Yena Parc

SEOUL (Reuters – Lee, who was working as a manager for South Korea’s third-largest pension fund in the world, quit earlier this year. Lee had become tired of having to commute long distances between her Seoul residence and her Jeonju office.

Lee lived four years in Jeonju as a single woman in a one-bedroom apartment. She traveled from Seoul to Seoul on weekends and spent the week in Jeonju. Her family was at risk if she didn’t decide to quit.

Lee was one of 140 money managers that left the National Pension Service, worth 930.5 trillion won (788 billion dollars), since 2016. This happened shortly before the service moved to Jeonju as part of the relocation of large agencies from Seoul.

This is nearly half of the 320 people currently employed at the fund’s investment arm. It’s an alarming brain loss for Asia’s fourth largest economy. The main public pension plan also invests heavily in Korean blue-chips like Samsung Electronics (OTC) and Hyundai Motor Co.

Lee said that she was unable to live in Jeonju during the week and felt like I was losing so much. She agreed to only be identified by her surname and now works as an asset manager in Seoul’s Financial District.

The assets of the NPS are nearly equal to the country’s gross domestic products. They manage pensions for South Koreans who work in the private sector and those who do not have a job.

Management at the fund is facing a huge wave of retirements, which will be triggered by the global fastest-aging society.

However, 57% of the jobs that the NPS opened in the last five years have been filled.

NPS officials acknowledged that the higher number of investments is partially responsible for this, however they also acknowledge the problems surrounding relocation.

According to Reuters, the official said that the situation has stabilized a bit since Jeonju was relocated. However, manpower issues seem to be back in play because there have been many job openings which apparently impacted the relative vacancy rate.

We are making efforts to attract talent by improving work conditions and having talent development programs.

In order to address staff shortages it eliminated the requirement of one year work experience from all its September job posts and offered opportunities abroad to equity fund managers.

NPS had an annualized return of 9.7% on its investment for 2020. That was below 25.15% in Japan for GPIFs, and lower than 20.4% at Canada Pension Plan Investment Board.

This partly reflects its more conservative investments. Fund managers also say that it’s less vulnerable during downturns.

NPS will increase overseas investment allocations by 50%, from 34% in 2019, to be 50 percent.

As of 2020, it has 30 employees in New York, London, and Singapore. This is far less than the 351 Canadian staff and the 252 Norwegian staff at NBIM.

A deeper pool of investment talent is required to achieve more ambitious returns, something that has proven difficult to retain and attract since 2017.

Hong Chun-uk, who was the NPS’ senior fund manager in 2015, stated that when I was a manager, there was an average of eight to 10 candidates competing for one manager job. After we had screened out inexperienced applicants, the pay was lower.

After the announcement of its relocation, he left the fund and became an economist with a Seoul-based brokerage.

BIG TOWN, BIG MONEY

Since 2005, the NPS was one of 150 public agencies and corporations in state that moved out of Seoul. A further 100 institutions including the National Assembly are also scheduled for relocation.

This major change was part of an overall government strategy to shift economic and political power from Seoul, reduce congestion in Seoul and create regional cities.

It has been difficult to find positions at the fund, which led to debates about whether it is worth relocating important public institutions.

While two NPS fund managers left, experts predict that the brain drain will have an impact on the NPS fund’s performance.

Yun Sukmyung, chief of Korean Pension Association stated, “In Korea there is a strong preference to reside in Seoul among families for schools and lifestyle.” It was obvious that the political effort ignored this and incompetent, inexperienced fundies would eventually harm its investment returns.

Jeonju was a place where many of the fund managers lived a high standard of urban life.

Lee explained, “There’s a restaurant in the area that I liked to frequent and where I was used to meeting my boss and people from other departments all the time.” The NPS expects all of its employees to visit the area.