Reelection of the 'Capital Market President' Halted by Impeachment... Challenges in Personnel Appointments at the Mutual Aid Association

The appointment of the Chief Investment Officer (CIO) of the National Pension Service (NPS) is being delayed due to the aftermath of the impeachment political turmoil. This is caused by external issues such as the unstable political situation, not internal problems.

According to the NPS on the 17th, the term of Seo Won-ju, the NPS CIO, expired on December 26 last year. However, no decision has been made regarding his reappointment or the selection of a successor. As the largest institutional investor in Korea, the NPS CIO oversees the management of approximately 1,170 trillion KRW in assets and is referred to as the "President of the Capital Market." An NPS official stated, "Seo Won-ju CIO is currently performing his duties normally," and added, "He will continue to perform his duties until a successor is appointed or his reappointment is confirmed."

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Seo, who took office in December 2022, raised the NPS fund management returns to double digits over two years, receiving positive evaluations from the market. The NPS achieved a record high return of 14.14% in 2023. Although the final figures for last year have not yet been compiled, it is expected that double-digit returns were also achieved. Thanks to this, a smooth reappointment was anticipated early on. Reappointment is possible on a one-year basis. If a replacement is to be made instead of reappointment, a public recruitment for the successor is held about three months before the term expires. The absence of such procedures also supports the speculation of Seo’s reappointment.

However, the decision on reappointment has been repeatedly postponed due to 'political risk' triggered by the martial law incident. The Ministry of Health and Welfare, the supervisory ministry of the NPS, is in a state of turmoil. The reappointment of the NPS CIO is finalized with the approval of the NPS chairman and the Minister of Health and Welfare. The delay in government personnel reshuffles, including the replacement of Minister Cho Kyu-hong of the Ministry of Health and Welfare?who was rumored to be replaced before the martial law incident?has caused delays in personnel decisions for affiliated organizations such as the NPS CIO. An industry insider said, "There is no problem within the NPS, but appointments are delayed due to external issues, which must be frustrating," adding, "In the worst case, there may be no official decision until the impeachment trial and early presidential election are resolved."

Not only the NPS but also the leadership changes at major mutual aid associations are facing difficulties. In particular, the Police Mutual Aid Association has not even discussed appointing a CIO due to the chairman position being vacant. Since the retirement of former chairman Bae Yong-ju in July last year, a new leader has not been selected. Furthermore, after former CIO Han Jong-seok retired in October 2023, the investment 'control tower' position has been vacant for over two years. Due to the leadership vacuum, the Police Mutual Aid Association continues to experience uncertainty in major investment decisions and is recording lower returns compared to other mutual aid associations. While other mutual aid associations are expected to achieve 'record-high returns' thanks to foreign exchange gains from the strong KRW-USD exchange rate and the booming global stock markets including the U.S., the Police Mutual Aid Association’s return last year is estimated to have barely exceeded 5%.

The Administrative Mutual Aid Association and the Teachers Mutual Aid Association, whose CIO terms are about to expire, are in relatively better situations. For the Administrative Mutual Aid Association, where CIO Heo Jang’s term expires in February, the likelihood of reappointment is high. The Administrative Mutual Aid Association CIO can be reappointed for up to three years. The Teachers Mutual Aid Association, which has the largest assets under management (AUM) among mutual aid associations, has already designated Ko Jae-taek, head of the Fund Management Strategy Office, as the new CIO to succeed Park Man-su as of the 16th. The Teachers Mutual Aid Association traditionally appoints 'internal candidates' as CIOs and manages over 50 trillion KRW in assets. Ko will be officially appointed as CIO once approval from the Ministry of Education is obtained.

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