Korea's NPS loses chairman, CIO

CIO Wan-Sun Hong's two-year term ended last week and he will be replaced, with applications open until November 16. It follows the resignation of Chairman Kwang Choi in response to conflicts with the Ministry of Health & Welfare over whether or not to renew Hong's term.

Last month Choi refused to extend the term by a further year - in the past CIOs have served for two years with the option of a one-year extension - and the ministry demanded that he consider his position, having failed to consult it on the decision.

The origins of the power struggle lie in the ministry's plan to spin off NPS' fund investment office into an independent state-run investment corporation, Korea's Joongang Daily reported. Hong supported the idea, while Choi opposed it on the grounds that transparency would be weakened. The ministry decided that the two men should take responsibility for the escalation of the dispute, and both depart.

Choi, an economist who served as health and welfare minister in the late 1990s, became chairman of NPS in May 2013. Six months later Hong joined, having spent much of his career at Hana Financial Group, including stints at Hana Bank, Hana Daetoo Securities and Hana Allianz Asset Management.

NPS was set up in 1988 and the National Pension Fund Management Center was launched in 1999 with a view to professionalizing investment management. At the time NPS had KRW500 billion ($432 million) in assets and was three years away from starting its domestic alternative investment program. The fund first went into offshore alternatives in 2005.

As of August 2015, NPS had KRW495 trillion in assets, of which KRW50.2 trillion, or 10.1%, was in alternatives. The domestic alternatives portfolio was worth KRW21.7 trillion by the end of the second quarter of this year, including KRW6 trillion in real estate. Of the KRW26.5 trillion overseas alternatives portfolio, KRW12.5 trillion was in real estate.

The fund is expected to exceed KRW500 trillion this year, KRW847 trillion in 2020 and KRW2,561 trillion in 2043, according to its 2014 annual report. Assuming no change in the percentage allocation, the KRW46.7 trillion committed to alternatives at the end of 2014 would be more than KRW253 trillion by 2043.

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