AsianInvestor's Top 20 pension executives in Asia list showcases an array of senior executives, from CEOs and CIOs to heads of responsible investing and equity chiefs -- change-makers who are leading the industry with their forward thinking and innovative practices.
As Asia faces a growing silver tide, it's imperative that the pensions industry takes steps to modernise and improve its operations to cater to increasing retirement demands. That will require skilled and talented professionals.
You can find more about the rationale for our Top 20 list here.
Today, we showcase two senior investment executives from Korea.
Chief Investment Officer, Teachers’ Pension
To be a successful investment chief at a pension fund, it is essential to remain steady in stormy financial waters while aligned with long-term asset allocation strategy.
It's something that Lee Kyu-hong, CIO at Teachers’ Pension (TP), does well.
The fund's cumulative return on investment for January- April 2023 climbed to 8.27% -- nearly on par with the benchmark's 8.28% gain for the four months.
Lee and his team continue to be proactive to change the odds in TP’s favour.
The fund's five-year plan from 2022 to 2027 shows it plans to shake up the portfolio mix by increasing the share of alternatives, which stood at 24.7% of total AUM by end-2022.
While domestic alternatives will remain at roughly 10% of total AUM, overseas alternatives are expected to grow to 19% from 14.3%, raising the share of alternatives to 29% by 2027.
The overseas alternatives boost also provides diversification perks. Meanwhile, allocation to domestic fixed income and overseas equity are expected to come down.
It seems like a sensible move for TP given the asset class's historical performance.
Since investing in alternatives in 2013, the fund has generated positive annual returns from the asset class, even beating the benchmark every year except in 2022.
The fund serves over 440,000 members, of which 24% are pensioners. So with relatively less pressure on payouts, the fund has space to invest further in alternative assets, which tend to be fairly illiquid.
With Lee in charge, the fund appears to be in good hands.
Chief Investment Officer, National Pension Service (NPS)
A job with immediate challenges and long-term objectives is what Seo Won-joo took on in December 2022 as chief investment officer at Korea’s National Pension Service (NPS).
Seo, a former CIO of Goverment Employees Pension Service, immediately adopted a more assertive stance: he said the world's third-largest pension fund by assets will become a more active shareholder -- and early this year, showed the fund stands by that committment.
In February, Korean telecom giant KT’s CEO Ku Hyeon-mo decided not to seek a second term after NPS, its biggest shareholder, and other investors, demanded a more transparent process in selecting a candidate to lead KT for the next three years.
The opposition prompted KT to restart the CEO selection process.
Ku's withdrawal from the selection process can be credited NPS's tough corporate governance stance.
The opposition to a CEO hire at a portfolio company is considered a first for the fund in its stewardship activities.
Given its sheer size and influence in financial markets, the fund is often at risk from political power games. Politicians and shifting governments have in the past used NPS as a political tool, sometimes with damaging consequences.
It's widely known that NPS — which is projected to run out of funds as early as 2055 — has been under scrutiny for a while.
To tackle the challenge of drying up funds, Seo has been tasked with raising the fund’s target investment return for the next five years to 5.6% from 5.4%.
NPS plans to raise its equity and alternative investment exposure and buy less fixed incomeas part of a larger plan to boost profitability and achieve the required returns.
The fund will invest 55% of total assets in equity, 30% in fixed income and 15% in alternatives from 2024 to 2028, according to its five-year asset allocation plan finalised in May.
The allocation plan for 2023, meanwhile, is: 46.2% for equity, 40% for fixed inome and 13.8% for alternatives.
About 47% of its portfolio is also nvested overseas, which has faced some backlash.
In May, finance ministry officials urged the pension fund to refrain from increasing overseas investments to help stabilise the domestic foreign exchange market.
NPS is said to have rejected that idea.
Given that Seo has been in the job for only a few months, AsianInvestor considers this pension executive as 'one to watch' as he carefully manoeuvres portfolio returns, goverment demands and changing market conditions over the rest of his term.
His term is for two years, which can be extended annually based on fund management performance.
One Seoul-based advisor pointed out that during the selection process, Seo had been a strong contender among all potential candidates for the CIO role at NPS.
The advisor said Seo's strong credentials in asset management, including overseas investments and alternatives investments, made him a top choice for the job.
AsianInvestor believes he has made a good start as of now.
(All AUM figures in US dollars)
On Monday, we showcase top executives from Malaysia and New Zealand.