S.Korea’s NPS investment arm suffers from chronic understaffing
Se-Min Huh and Jung-hwan Hwang
Oct 02, 2024 (Gmt+09:00)
National Pension Service headquarters in Jeonju, North Jeolla Province South Korea’s largest institutional investor, the National Pension Service (NPS), managing 1,150 trillion won ($870.6 billion) in assets, struggles to recruit investment managers, raising concerns about the quality of its fund management capabilities.
According to NPS data obtained by Kim Sun-min, a lawmaker with Korea’s Rebuilding Korea Party, on Tuesday, the number of NPS Investment Management staff stood at 362 as of the end of June — 53 short of its annual job quota.
This is the largest unmet jobs level in the investment arm of NPS, the world’s third-largest pension fund, since 2017 when NPS Investment Management relocated its headquarters to Jeonju, North Jeolla Province, 240 kilometers south of Seoul, from the capital city.
In 2017 the NPS investment unit failed to hire 34 employees, more than double the unmet need in 2015, when 15 jobs went unfilled. Understaffing increased to 49 jobs in 2022 before falling to 28 in 2023.
The NPS shrugged off its investment staff shortage as a one-time phenomenon following an increase in its annual staff quota to 415 this year from 365 in 2023.
REMOTE LOCATION AND LOWER SALARY
But others attributed the national fund manager’s chronic understaffing to the relocation of its main office from Seoul to Jeonju, an area remote from the bustling capital city with its more robust social, economic, educational and cultural infrastructure.
Its lower salaries for investment managers compared with those at private investment banks are also blamed for the staff shortage.
Such understaffing poses a risk to the NPS’s fund management capabilities, investment experts warned.
National Pension Service Chairman Kim Tae-hyun speaks in San Francisco Last month, the Korean government vowed in its national pension fund reform proposal to boost the NPS’s investment return to more than 5.5% from the current 4.5%.
If the government's NPS reform bill passes, total assets managed by NPS Investment Management could jump from 1,100 trillion won as of the end of July to 5,000 trillion won in 2026.
Without enough investment experts at NPS Investment Management, it would be a daunting task to manage large national fund assets with handsome investment returns, said investment experts.
RELOCATION BACK TO SEOUL?
Some observers suggest the NPS return its head office to Seoul to bring enough fund managers on board.
But the NPS relocation requires an amendment to the country’s national pension law, making it hard to do any time soon.
Others recommend pay hikes for NPS investment experts that are large enough to offset the disadvantages of raising a family far from the capital city.
Opening more regional offices abroad could be another option to entice fund managers to NPS jobs and improve the quality of the fund’s national management, said Nam Jae-woo, a fund and pension research fellow at the Korea Capital Market Institute.
The NPS has 22.35 million insured people, nearly half of Korea’s population, and 5.86 million pension beneficiaries.
It has achieved a cumulative return of 682 trillion won since its inception in 1988.