National Pension Service Names Lee Kyu-hong as CIO, Testing Asset Allocation of $1.35 Trillion Fund

Multi-asset specialist who led Teachers’ Pension investments for four years

Experience across private asset managers, real estate and public pensions

Two-year term demands leadership on internal controls and restoring trust

This article was published on Market Insight at 11:47 a.m. on September 14.

South Korea’s National Pension Service has appointed Lee Kyu-hong, former head of investment management at the Teachers’ Pension, as its new investment chief to oversee $1.35 trillion in retirement assets. The move puts a pension veteran with experience spanning private asset management, real estate and public pensions in charge of one of the world’s largest retirement funds.

The National Pension Service on September 14 named Lee as chief fund officer, a role that also serves as chief investment officer, according to the financial investment industry. He will begin work on September 15. His two-year term runs through September 14, 2028, and may be renewed in one-year increments depending on performance. The NPS chairman appoints the fund executive after a recommendation by the fund executive recommendation committee and approval of a performance contract by the Ministry of Health and Welfare.

Born in 1966, Lee is regarded as a multi-asset investment specialist with experience in both traditional and alternative assets. He worked at Samsung Asset Management and DB Asset Management before serving as CIO at Eastspring Asset Management and NH-Amundi Asset Management. He later became chief executive of Ascendas Asset Management, a real estate-focused investment firm, before moving to the Teachers’ Pension as CIO in 2019. His experience across private financial firms, real-asset managers and a public pension investment organization is widely viewed as a key strength.

At the Teachers’ Pension, Lee oversaw fund management for four years starting in October 2019. After completing an initial two-year term, he was reappointed twice. The fund posted returns of 11.15% in 2019, 11.49% in 2020 and 11.95% in 2021, marking three straight years of 11%-plus gains. In 2021, it generated 2.4738 trillion won ($1.79 billion) in investment income, the highest since the organization was established.

The National Pension Service launched an open search in June for its next CIO. After document screening and interviews, it narrowed the field to four finalists: Park Cheon-seok, former head of investment management at Saemaul Geumgo; Lee; Lee Do-yoon, former head of asset management at the Yellow Umbrella Mutual Aid; and Kim Ho-jin, former head of fund management at the National Federation of Fisheries Cooperatives. Lee’s appointment also brings to a close the tenure of Seo Won-joo, who had remained in the post after his official term ended late last year until a successor was selected.

Lee’s biggest challenge will be to manage the rapidly expanded fund steadily while maintaining long-term returns. The National Pension Service’s fund assets rose to $1.35 trillion at the end of June. Its return for the first half reached 27.22%, the highest ever for a six-month period. Domestic equities returned 107.37%, while overseas equities gained 17.81%, lifting overall performance.

Another key test will be how he adjusts an asset mix that has shifted sharply. As of the end of June, the National Pension Service held about $393 billion in domestic stocks, $479 billion in overseas stocks and $189 billion in alternative investments. The share of domestic equities in total financial assets climbed to 29.1%, especially after a stock-market rally. Although the fund management committee raised this year’s target allocation for domestic equities to 20.8% from 14.9% and widened the permissible range, the pension still needs to adjust weightings across asset classes in line with market conditions while minimizing the impact of its trading on the market.

Managing risk across an increasingly complex portfolio as overseas and alternative investments expand is also a core task. As the fund grows, overall performance is driven less by outsized returns on individual investments than by how domestic and overseas stocks, bonds and alternative assets are allocated and adjusted across market cycles.

Lee also faces the task of strengthening internal controls and restoring trust in the investment organization. The National Pension Service has recently been investigating allegations that non-public investment information was leaked from its real estate investment division. It has also tightened internal controls by providing all employees with training on information security and confidentiality. “The new CIO will be required to show leadership not only in investment performance, but also in stabilizing organizational management and the decision-making system,” a pension industry official said.

Min Kyeong-jin, Hankyung.com reporter min@hankyung.com