As Chief Investment Officer (CIO) of the National Pension Service (NPS) of South Korea, Won-ju Seo has taken on a task with long-term goals and immediate challenges. But Seo has already taken a assertive stance by stating that NPS will be a more active shareholder and showing that the world’s third-largest pension fund is backing that statement.
NPS Seo Won Joo
Beyond providing the investment performance of public pension funds, there are other issues and stakeholders to keep in mind. Still, a Seoul-based investment industry source said Seo’s priority is to boost earnings.
“Capital markets may suffer from high volatility, but may offer opportunities in the long run. He should invest from a long-term perspective, but there is a lot of noise and it It can interfere with maintenance,” the source said. asian investor on the condition that you do not give your name.
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In fact, NPS — projected to run out of money As early as 2057 – being scrutinized. Politicians and changing governments have seen NPS used as a political tool, sometimes with detrimental consequences.
This was highlighted in November as part of the South Korean government’s work to bring forward predictions about when the national pension fund will run out. The process is part of efforts to reform the country’s pension system as it faces severe financial stress amid declining birth rates and an aging population.
“Today, six of the 20 members of NPS’s fund management committee are the fund’s chief decision makers and government officials when it comes to actually handling the funds,” said NPS’s fiduciary duty commissioner. Jeong Woo-yong, a member of the association, said, At a press conference held in the National Assembly on November 7, he said he wanted to improve the governance structure of the NPS.
He noted that the fund’s key decision-making bodies consisted of “too many” government officials and a shortage of economic experts. He said there was an increased risk of being caught, leading to sluggish profitability.
“This makes it difficult for the NPS to free itself from government intervention. , shouldn’t even think about getting involved,” he added.
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bold move
Another example of political intervention that challenged the activities of the NPS was the removal of the pension fund’s headquarters in a small city 200 kilometers south of the capital and financial center of Seoul, a three-hour drive. It was a decision to move to a certain Jeonju.Not to mention moving This has led to an outflow of staff who do not want to travel or commute to Jeonju.
“we believe [Seo will] A Hong Kong-based investment consultant who advises property owners in South Korea said: Asian investors, on the condition that you do not give your name.
The investment consultant also pointed to improving performance in the current market conditions as another key mission of Seo’s three-year tenure.
“He may also be increasing shareholder engagement and sustainable investments in line with NPS’s market position,” the investment consultant added.
In fact, Seo was barely announced to take over as CIO in late December. At a press conference on Dec. 27, Seo said companies without a dominant stakeholder need to make their CEO hiring process more transparent and fair.
Such companies should be more open to external candidates for the CEO position to select the best person for the role, Seo added. “Some companies still restrict outside experts from applying for chief executive officer positions. are restricted to doing
He also stressed that a fair and rational CIO election process would enhance shareholder value, including NPS. Pension funds will strengthen their code of responsible investment and stewardship for sustainable growth, he added.
challenge accepted
On December 28, NPS announced that South Korean telecoms giant KT has decided to make current CEO Ku Hyeon-mo its sole candidate for the next CEO position.
“KT has nominated current CEO Ku Hyeon-mo as the sole candidate for its upcoming CEO election on December 28. This includes a transparent and fair process for selecting candidates for the CEO. It does not meet the basic principles of elections,” the NPS Fund said.management unit said in a statement dated December 28.
In a statement, the fund management department added that it would “consider this issue when exercising shareholders’ rights,” suggesting it would vote against Ku’s continued term at the March 2023 shareholders’ meeting.
The statement is believed to be the first time since its inception in 1999 that the fund management department has publicly expressed its views on hiring a company’s CEO. Whether this new assertive approach will be implemented without political and public criticism remains to be seen.
long horizon
It is expected to gain more runway for NPS to focus on long-term strategies to ensure performance. It comes from an ongoing process of reform.
The current government insists it will “promote pension reforms that ensure fiscal sustainability, intergenerational equity and old-age income,” the health ministry said. The ministry said it plans to accelerate reform negotiations to come up with a final plan by October this year.
President Yoon Suk-yeol, who has made pension and health insurance reforms a priority since taking office in May 2022, defined these two aspects as “universal welfare.” Still, each individual would have to cover a portion of the cost, requiring a “thorough and scientific approach,” he said.
Details such as individual contributions, private pension schemes and raising the national retirement age will be discussed. In the meantime, Seo hopes she can focus on implementing her NPS’s long-term asset allocation strategy.
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