Scrutiny Distracts Staffers at Korean Pension Giant: Report

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South Korea’s National Pension Service (NPS) is the third-largest pension fund in the world, but the work culture is very different from other large funds, according to a report from Reuters.

Insiders who spoke to Reuters paint a picture of a workplace where portfolio managers walk on eggshells, and staffers are sometimes paralyzed by fear of criticism from auditors and politicians.

The tension stems partially from the fact that the fund’s CIO is annually brought in front of numerous government panels that dissect his decision-making process.

More from Reuters:

Last year investment managers at South Korea’s National Pension Service (NPS), which oversees $430 billion in assets, were looking to buy a portfolio of blue-chip stocks from emerging markets including Southeast Asia.

The investment was to have been part of a push to diversify a heavily domestic portfolio, but ultimately the world’s third-largest pension fund took a pass.

Fear of second-guessing and criticism by auditors and politicians if the investment turned sour outweighed the promise of upside, said an NPS investment manager familiar with what happened.

“It’s always: ‘is there a possibility this could go bad?’,” said the investment manager, declining to be identified as he was not authorized to speak to the media.

“Because some investment managers might have been previously criticized (by government auditors) and now avoid investments that could be controversial.”

Heavy scrutiny distracts NPS managers from generating higher returns on retirement money earmarked for the fastest-ageing population among advanced economies, insiders say.

Since last month, the chief investment officer of NPS has been brought before four parliamentary panels to explain and justify investment decisions – an increasingly onerous annual process that has “cut into” the work of investment managers below him, said another NPS manager.

It is also relatively understaffed.

NPS had 261 people in its investment office as of September, managing on average about 1.9 trillion won ($1.68 billion) in assets each. By comparison, CalPERs, the largest U.S. pension fund, has about 370 people in its investment office overseeing $288 billion in assets, a CalPERS spokesman said, or $779 million each.

NPS manages about $430 billion in assets.

 

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