NPS faces staffing issues amid scandal, HQ shift

The decision to shift the headquarters of Korea's National Pension Service Investment Management (NPSIM) to a city that is a four-hour drive away from Seoul appears to be further damaging the employment appeal of the embattled retirement fund.

By February 25, NPSIM will have moved its central office (see the new building below) to the newly constructed city of Hyukshindoshi in Jeonju, Jeolla province from the Gangnam area of Seoul, where it has been located since November 2005. The plan is for the $477 billion fund to set up additional investment offices in the same region.

Moon Hyungpyo, chairman of NPS, said the shift is essential to prepare the future of the institution, which he predicted would become the world's biggest pension fund by 2037, with $2.1 trillion of assets under management (AUM).

However, Moon’s vision has questions hanging over it after the former minister of health and welfare was arrested in December over his alleged ties to a scandal relating to impeached president Park Geun-hye. He was indicated in January, and is awaiting a verdict over the accusations.

The recent negative news engulfing the pension company and the loss of experienced personnel has led industry observers – including ex-NPS officers and advisers – to tell AsianInvestor that they fear for the future of the pension fund.

A spokesman for NPS did not immediately respond to requests for an update on Moon’s status.

The purported purpose of the move by NPSIM is to reinforce Jeonju’s economic status. There are signs of this impact. The country's central bank, Bank of Korea, confirmed to AsianInvestor that it had forecast the move would create 940 related job opportunities in the region’s transportation and accommodation industries.

NPS itself hired 26 new employees (19% of its total annual recruitment) from Jeolla in 2015 and has said it intends to hire more than 15% of its new employees from the province in future. According to LH, a state-owned housing provider, there has been a rise in interest in Jeonju since NPS announced the move.

Political scandal

But hopes that this would prove a fillip to the province are being offset by the political scandal engulfing the fund.

Moon was detained by special prosecutors on December 28 over allegations that, as minister of health in 2015, he ordered NPS to vote in favour of a merger of between the Samsung Group affiliates Samsung C&T and Cheil Industries. NPS was a major shareholder in both and its votes helped to secure the successful merger.

The NPS chairman is believed to have been in emergency detention for further interrogation ever since, while the fund's Seoul and Jeonju offices have also been investigated by prosecutors. Additionally, most of the 12 members of its investment management committee were reportedly banned from leaving the nation as part of the investigation.

The NPS spokesman did not respond to emailed inquiries about the accuracy of this report.

This came only a year after a spat between the former chief executive and chief investment officer of the fund, which saw both step down in late 2015.

Damaging impact

The world’s third-largest pension fund as of 2017, having overtaken the Dutch National Civil Pension Fund (ABP) last year, had been having a harder time retaining and hiring employees even before the Samsung scandal broke, according to sources familiar with NPS.

While NPS’s relocation to Jeolla may prove good for the province, it caused a lot of unsettlement among its own employees, many of whom prefer living in the capital. Moreover, visitors to the NPS coming from Seoul or Incheon airport will now have to allocate at least a full day for any meeting there.

Before NPS announced the relocation, it typically suffered turnover of eight or nine employees a year. But 10 staff members left in 2015 following the final decision to move, and that number rose to 30 in 2016.

Last year, NPS raised its staff wages by 10% but that does not appear to have slowed the outflow. The Chosun Daily reported in January that eight NPS employees intended to leave for jobs in Seoul.

Three out of 11 members of senior management and nine of 38 team leaders have reportedly left their jobs since the move was announced.

Spokespeople for the pension fund declined to comment on the wage changes and did not respond before deadline on the departures.

Recruiting also seems to be problematic. The competition rate for NPS’s new recruitment was reportedly 10 to one before the switch was announced, but that rate dropped to six to one last year, when the fund hired 53 new staff.

As of the end of December, NPS's investment portfolio comprised $250 billion of domestic bonds, $87 billion of domestic stock, $68 billion of foreign shares, $51 billion of alternative investments, $19 billion of foreign bonds, and $612 million of short-term funds.

The fund had been planning various major changes to its allocation, including a big push into overseas equities and alternatives, including hedge funds. These plans risk facing delay due to the fund's current turmoil