[Beyond the Field] Neither the Ruling Nor the Opposition Party, Only Returns Matter

The National Pension Service (NPS) has appointed Lee Kyuhong, former Head of the Fund Management Office at the Teachers' Pension, as its new Chief Investment Officer (CIO). He will lead the fund, which manages 1,866 trillion won and stands among the world's top three pension funds. The term is two years by default, with the possibility of yearly extensions. Having worked at Samsung Asset Management, Eastspring, and NH-Amundi, Lee previously achieved returns of over 11% for three consecutive years during his tenure at the Teachers' Pension. However, the status and scale of the NPS are incomparable to his former posts. The challenge he faces is not limited to variables like expected returns and risk factors; political considerations are now part of the equation as well.

On September 11, the National Assembly hosted a Stewardship Code forum organized by the Democratic Party's K-Capital Market Special Committee. Assemblyman Kim Namgeun stated, "Sixty percent of listed companies have a price-to-book ratio below 1, but large asset managers largely refrain from stewardship activities out of fear of backlash from corporations. If the NPS takes a firm stance, won't others follow suit?" His remarks suggest an intention to use the NPS to drive market-wide behavioral changes. The opposition party's criticism comes from the other direction. When the NPS postponed rebalancing (adjusting asset allocations) in the first half of the year, the KOSPI plunged and resulted in an estimated 18 trillion won in paper losses. The opposition questioned whether the government had delayed its principles in an attempt to support the stock market. Although the criticism comes from opposing directions, both advocate for increased political involvement in NPS operations.

Investment is a test whose results only emerge much later. A decision believed to be right today may prove wrong years down the road, while moves that were initially criticized may ultimately turn out correct. The same holds true for investments made in response to political demands. Whether such decisions lead to good or bad results, even the decision-maker cannot predict in advance. Usually, it is only when negative outcomes occur that the political motivations behind a decision come under scrutiny. This past January, the NPS chose to delay selling domestic stocks when their proportion in the fund exceeded the target. In May, it even increased the target share to 20.8%. Over the next two months, the KOSPI fell by almost a third, resulting in a steep decline in the value of these holdings. Regardless of the actual motivation behind the investment, as soon as losses become apparent, political interpretations quickly emerge.

In such an environment, neither the ruling nor the opposition party serves as a defense for the new CIO. Only returns offer real protection. The NPS ultimately exists as retirement funds for 22 million subscribers, and its purpose is not to serve as a steward or to prop up the stock market, but to reliably pay out the promised pensions. The only metric that determines its ability to fulfill this promise is returns. In the first half of this year, the NPS delivered a return of 27.22%, with domestic equities returning 107.37%. Thanks to these strong returns, the projected depletion date of the fund has been pushed back to 2069, but the National Assembly Budget Office notes that even a 1 percentage point swing in returns can move this date by more than 10 years in either direction. The crisis is not over—it is merely postponed. Both responding to political demands and mitigating criticism over poor timing can only be achieved through performance. For the new CIO Lee Kyuhong, the only thing that matters is numbers, not taking sides.

This content was produced with the assistance of AI translation services.