South Korea’s National Pension Service (NPS) has reportedly decided to introduce a new hiring policy for its portfolio managers. According to the new policy, one of the largest pension funds in the world now wants to hire fresh talents and nurture them instead of hiring experienced managers as it currently does.
To date, the NPS has hired only experienced professionals for portfolio manager positions. Since the pension manages massive assets — about 675 trillion South Korean won ($571 billion) – the emphasis on experience makes sense.
The pension’s move toward a new direction comes amid continuous exodus of its staff members, especially portfolio managers.Enjoying this article? Click here to subscribe for full access. Just $5 a month.
The NPS has been grappling with staff turnover since it decided to move its office in February from Seoul to Jeonju, which is about three hours away from Seoul by high-speed rail.
In 2016, a total of 30 managers left the investment management division over concerns about their careers and the quality of life after the NPS announced it would move its Seoul-based headquarters. That equated to three times the number of resignations seen in 2015.
In order to retain and attract people, the NPS has boosted salaries for its in-house portfolio managers, which would put them in the upper quartile of their private sector counterparts. The pension fund also provides dormitories for all portfolio managers and their family members and even loans to aid them in renting or purchasing a home.
However, such incentives could not stop the outflow. With more of its staff members leaving, the pension has thus been continuously hiring new people to join. However, many of its attempts to fill vacancies have been unsuccessful.
Now it appears that the NPS is trying a new solution: nurturing talent from scratch.
The first plan laid out by the government was to establish a graduate school specifically designed to grow investment professionals for the NPS.
The establishment of the specialized graduate school was part of the election manifesto of South Korean President Moon Jae-in. Moon visited Jeonju in March 2017, when he was a candidate in the presidential race, and said that the establishment of such a school would help to turn the city into a financial hub.
However, the plan faced backlash from the Ministry of Education, which believed the function of the specialized graduate school would overlap with several existing institutions.
In response, the Ministry of Health and Welfare, which oversees the NPS, said in December last year that it would review its plan for the establishment of the graduate school and consider other options such as setting up an in-house nurturing program or outsourcing similar training to a third party.
About six months later, it appears that the government and the NPS have not been able to move forward. Even the plan to establish an in-house training program is still merely a proposal, with nothing concrete decided.
Amid the exodus of staff members, it might be the best option for the NPS to manage the in-house nurturing program. There is no doubt that it would open up an excellent opportunity for those who are ambitious about growing professionally in the asset management industry. After all, the NPS is a governmental organization, which is a highly sought after employment destination for fresh graduates these days.
However, the issue is that managing assets requires insight, market knowledge, and on-the-ground research experience that cannot be built in a year or so.
In particular, the fact that the NPS is dramatically increasing its investments in alternative sectors and overseas equities makes it more difficult for inexperienced officials to perform well. The pension service announced last week that it will allocate half of its overall investment portfolio to foreign assets by 2024, up from just 30.1 percent in 2018.
The fund’s management committee, the pension giant’s top decision-making body, recently approved its investment plan for 2020-2024, targeting a 5.3 percent investment return for the five-year period. In addition to the shift toward foreign assets, the NPS plans to meet its target by setting its equity allocation at around 45 percent, bonds at around 40 percent, and alternatives at around 15 percent.