[Edaily Marketin JI YEONG-EUI Reporter] It has been confirmed that the National Pension Service’s Fund Management Division pushed ahead with investments in domestic real estate development projects despite strong internal opposition and warnings of low returns and high risk.

Furthermore, it has been revealed that at the time of the investment, an individual with ties to a high-ranking official in the NPS Real Estate Investment Division joined the asset management firm; although controversies arose regarding personnel interference through the exercise of investment rights and conflicts of interest, these were effectively swept under the rug without any significant investigation or scrutiny.

The suspicions that were buried at the time have recently resurfaced in connection with the recent attempt to forcibly replace the general partner (GP) of “Yeoksam Centerfield,” the recruitment of a former high-ranking official, and controversies over personnel interference targeting domestic and international asset managers. This has led to criticism that the NPS Real Estate Investment Division has effectively been exercising its investment rights as if they were personnel authority.

Overriding Risk Concerns... ‘Unprecedented’ Move to Force Through 252 Billion Won Investment in Development Project

According to internal investment review documents from the National Pension Service obtained by Edaily on the 20th, the National Pension Service invested

252 billion won in the

“The Exchange Seoul”

development project

in Mugyo-dong, Jung-gu, Seoul, in 2024. The total equity investment for this deal was 272 billion won, with the National Pension Service’s investment accounting for 92.6% of the total equity. The remaining funds are understood to have been contributed by GS Construction, Citycore, and the asset management firm.

Internal investment review documents from that time contain numerous opinions stating that the investment was unsuitable due to concerns over low returns and various risk factors identified during the internal profitability analysis. In particular, during the review process, two internal committee members—the Risk Officer and the Head of the Overseas Bonds Division—clearly expressed their opposition based on legal reviews and other factors. The key reasons cited were: △ issues regarding encroachment on property boundaries, △ the possibility of delays in obtaining permits and approvals, and △ the risk of tenants refusing to vacate the premises. Given that the National Pension Service was to bear 92.6% of the total equity, the documents expressed concern that the fund would suffer significant financial losses if these development risks materialized.

It was also revealed that internal warnings had been issued repeatedly regarding the appropriateness of the target rate of return (Net IRR of 14.07%) for this development project, which had not yet received the necessary permits. The document explicitly pointed out that, given the nature of the development project—which involves numerous variables such as construction costs and interest rates—achieving the target return would be out of the question if risks materialized, and the investment recovery could be limited to the principal amount.

Despite opposition from internal committee members and risk warnings, the proposal passed through the Investment Committee thanks to the strong determination of the Real Estate Investment Division and ultimately cleared the final hurdle at the Grand Investment Committee, the fund’s highest decision-making body. It is understood that external committee members—including the Chief Investment Officer (CIO), the law firm Kwangjang, and Bain & Company—generally supported the decision. This is viewed as an unusual decision compared to the National Pension Service’s historically conservative approach to domestic development projects.

An investment banking industry source familiar with the matter noted, “At the time of the 2024 investment, the National Pension Service was avoiding investments in domestic development projects due to political pressures and various other reasons,” adding, “Furthermore, there were serious internal concerns regarding whether it was appropriate for the National Pension Service to bear more than 90% of the equity in a deal involving significant development risks.”

Another official criticized the move, stating, “The National Pension Service is an institution that has always been most wary of potential losses to retirement funds.” They continued, “Regardless of whether The Exchange Seoul can eventually overcome the risks and deliver results, we must examine why the NPS Real Estate Investment Division was so fixated on this investment and why the pension fund went so far as to recklessly abandon its usual investment principles and stance to proceed with this investment.”

Allegations of Job Solicitation Using Investment Funds as a Weapon... The Privatization of Retirement Funds

Allegations of conflicts of interest surrounding hiring also surfaced during the investment process for The Exchange Seoul. It was confirmed that around the time the National Pension Service decided to make a large-scale investment—despite internal opposition—and actually disbursed the funds, an individual with a history of working at the same company (Samsung Securities) as senior officials in the NPS Real Estate Investment Division was hired by Koramco Asset Trust, the development manager for The Exchange Seoul.

Mr. A, a seasoned professional from Samsung Securities who joined Koramco in October 2024, is still employed there. As the timing of the massive investment decision coincided with the hiring, rumors circulated within the National Pension Service at the time suggesting “potential abuse of power regarding hiring directives leveraging the NPS’s investment and unfair treatment of Koramco”; however, these allegations reportedly subsided without becoming public.

This is not the first time allegations of abusive hiring practices—using pension funds as leverage—have been raised in connection with the The Exchange Seoul investment process. It has been revealed that, over the past few years, the National Pension Service has received multiple anonymous letters alleging that the Real Estate Investment Division pressured employees to resign and solicited favors regarding the appointment of CEOs and key executives at global and domestic asset management firms. However, critics point out that no substantive investigations or accountability measures have been properly carried out regarding these allegations.

One official who submitted a letter of complaint to the National Pension Service lamented, “The National Pension Service has remained unyielding all this time. No matter how much we presented cases of pressure on asset managers, hiring directives, and coercion to fire employees—and no matter how much we complained of harm and demanded an investigation—they refused to budge.”

Allegations of abusive hiring practices, which had been lying dormant, resurfaced recently during the process of replacing the general partner (GP) for the “Yeoksam Centerfield” asset—worth 4 trillion won—which ultimately fell through. The National Pension Service designed an unconventional settlement structure while designating Koramco Asset Management as the new GP for Centerfield. The Real Estate Investment Division’s attempt to transfer management rights to Koramco Asset Management was ultimately rejected by the Alternative Investment Committee, which pointed out that the plan to make an advance payment of fees to the existing manager, Aegis Asset Management, lacked sound legal and economic grounds.

In particular, it is reported that, in addition to the lack of legal and economic grounds, the National Pension Service’s Audit Office’s identification of potential personal conflicts of interest involving Koramco Asset Management played a decisive role in the rejection of the proposal. A, the former head of the Investment Support Division at the National Pension Service’s Fund Management Headquarters, retired last year and was rehired early this year as the head of Koramco Asset Management’s Jeonju office. Criticism has been raised that the mechanisms for controlling conflicts of interest involving former employees did not function properly, as Koramco Asset Management emerged as a candidate to replace the Centerfield GP immediately after former Division Head A joined the company.

National Pension Service and Koramco: “We followed due process… the allegations are baseless”

Koramco has categorically denied the allegations. Koramco stated, “Director A was an employee of Koramco Asset Trust; not only is his employer different from Koramco Asset Management, but there was also a gap of more than six months between his joining Koramco Asset Trust and the deal closing for The Exchange Seoul, so there was no possibility of his involvement in this project.” The company added, “There was absolutely no recommendation or intervention from external institutions, including the National Pension Service, during the hiring process.”

Koramco explained, “The Jeonju Office is a substantive hub established in line with the government’s policy of balanced regional development and general industry trends, and Director A is solely responsible for identifying business opportunities in the Honam region and conducting regional market research.” They added, “Communication regarding investment proposals to the National Pension Service, government relations, post-investment management of existing investments, and the replacement of the Centerfield GP are all exclusive responsibilities of headquarters, so he is not involved in any of these matters.”

They further added, “Prior to hiring, we complied with statutory reviews regarding restrictions on re-employment, and following a review by the compliance officer, we implemented information barriers to exclude him from duties related to transactions with the National Pension Service.”

Koramco also clarified, “The matters regarding The Exchange Seoul and the Centerfield GP transfer are unrelated and separate issues; the entire process was conducted through open competition on an equal footing with competitors, so no preferential treatment could have occurred.”

The National Pension Service (NPS) has also merely reiterated its general position that there were no procedural issues. Regarding the investment in The Exchange Seoul, the NPS stated, “It is difficult to confirm specific details regarding individual assets,” but added, “Investment proposals are being processed lawfully through the Investment Committee and the Alternative Investment Committee in accordance with the Fund Management Regulations and guidelines.”

Regarding the hiring allegations, they responded, “We cannot confirm matters related to the personnel or hiring of specific individuals; this is a matter to be addressed with the relevant asset management firm.” Regarding the move of former Division Head A to Koramco, they explained, “Verification of potential conflicts of interest, such as transaction restrictions on institutions that hire retired National Pension Service executives and employees, is strictly conducted in accordance with internal regulations.”

Meanwhile, on the 16th, the National Pension Service placed the head of the Real Estate Investment Division on administrative leave following approval by Chairman Kim Seong-ju.