[Edaily Marketin JI YEONG-EUI Reporter] It has been confirmed that the National Pension Service (NPS) unusually raised the voting threshold for its Alternative Investment Committee during the process of replacing the general partner (GP) for the Centerfield fund in Yeoksam-dong, Seoul. This move was taken in response to concerns over a conflict of interest that arose when a former high-ranking NPS official was rehired by Koramco Asset Management, as the NPS sought to replace the existing manager, Aegis Asset Management, with Koramco Asset Management. Amid ongoing controversy surrounding the NPS Real Estate Investment Division—including allegations of external interference in personnel decisions and conflicts of interest—the NPS determined that additional internal controls were necessary.

According to documents submitted by the National Pension Service to the office of Rep. Lee In-young of the Democratic Party of Korea—a member of the National Assembly’s Health and Welfare Committee—on the 12th, it was revealed that the NPS Compliance Support Office had requested “stricter voting requirements” from the Alternative Investment Committee on July 3, when the committee was deliberating on a proposal to change Centerfield’s asset manager. While the Alternative Investment Committee’s standard voting requirement is approval by at least two-thirds of the members present, it appears that a stricter threshold of at least three-quarters approval was applied to this particular agenda item. With the voting threshold raised, the proposal to replace Aegis Asset Management with Koramco was rejected by the Alternative Investment Committee.

The Compliance Support Office’s request to raise the voting threshold stemmed from the National Pension Service’s review of potential conflicts of interest arising from the re-employment of Mr. Hwang, the former head of the Fund Management Support Division, at Coramco Asset Management. The NPS determined that concerns regarding a conflict of interest were significant enough to warrant separate oversight during the process of changing asset managers. According to the NPS investigation, former Division Head Hwang retired on June 30 of last year and moved to Koramco Asset Management on January 19 of this year—approximately seven months later.

It is noteworthy that efforts to replace Centerfield’s general partner (GP) began one to two months before his joining Koramco. The NPS Real Estate Investment Division had been pushing to replace the existing manager, Aegis Asset Management, since late last year, and it was during this process that former Division Head Hwang joined Koramco. Subsequently, Koramco was selected as the preferred bidder for the new GP in April, and the final replacement proposal was submitted to the Alternative Investment Committee on July 3. As every stage—from the push to replace the GP, to the former senior executive’s move to Koramco, to Koramco’s selection as the preferred bidder and the final review—occurred in close succession, doubts in the market intensified regarding whether conflicts of interest had been properly managed.

Article 17 of the Enforcement Rules for the National Pension Service’s Internal Control Regulations on Fund Management stipulates that employees of the Fund Management Headquarters must be screened for potential conflicts of interest for two years after retirement. It further mandates that, “if there is a high risk of a conflict of interest,” remedial measures—such as exclusion from relevant duties, stricter voting requirements, or restrictions on the rating or score of the institution where the individual is reemployed—must be taken.

The fact that the National Pension Service, after reviewing former Division Head Hwang’s reemployment, actually requested stricter voting requirements for the Centerfield GP replacement proposal goes beyond merely confirming the fact of his reemployment. It is interpreted to mean that the Service independently determined there was a potential conflict of interest significant enough to warrant separate internal controls in the decision-making process. It is reported that during the discussions on the GP replacement, there were also intense internal disagreements regarding the unnecessary early settlement structure for the existing asset manager and the appropriateness of the legal and economic grounds for such a move.

The Real Estate Investment Division, Plagued by Endless Controversy… Keeping a Close Eye on the Private Use of National Pension Funds for Retirement

The background to the strong criticism surrounding the Centerfield GP replacement process lies in the various

controversies

that have plagued the National Pension Service’s Real Estate Investment Division over the past few years. In recent years, the industry has repeatedly raised suspicions that high-ranking officials in the Real Estate Investment Division exerted influence over the hiring and firing of executives and employees at domestic and international asset management firms. The replacement of Centerfield’s GP was also an issue that led to more than half a year of internal conflict and controversy, as it was pushed forward under the leadership of a high-ranking official in the Real Estate Investment Division at the time. A recent internal audit by the National Pension Service also confirmed that former Real Estate Investment Division Head A had committed “serious regulatory violations, including abuse of authority.” Related article ☞ [Exclusive] National Pension Service Real Estate Division Head Accused of ‘Abuse of Authority and Serious Regulatory Violations’… Disciplinary Action Following National Assembly Hearing

In particular, questions such as “Why Koramco again?” have been incessant in the market. In 2024, the National Pension Service invested 252 billion won—92.6% of the total equity—in the “The Exchange Seoul” development project in Jung-gu, Seoul. In October of that same year, an individual who had previously worked alongside senior officials from the National Pension Service’s Real Estate Investment Division at Samsung Securities joined Koramco Asset Trust—the project manager—as a mid-career hire. Even at that time, suspicions of interference in the hiring process were raised due to the timing of the investment coinciding with the hiring.

Market skepticism deepened earlier this year after former Division Head Hwang moved to Koramco Asset Management and Koramco was subsequently selected as a candidate for the Centerfield GP role. Koramco has maintained that former Division Head Hwang was solely responsible for identifying business opportunities in the Honam region and conducting regional market research, and that he was not involved in investment proposals to the National Pension Service or the process of replacing Centerfield’s general partner (GP). The company asserts that there was absolutely no recommendation or interference in hiring—including the recruitment of experienced professionals from Samsung Securities, such as Mr. Hwang—from external institutions, including the National Pension Service.

“National Pension Service, Which Manages Citizens’ Retirement Funds, Must Strengthen Internal Controls”

From the perspective of private asset managers, the National Pension Service is South Korea’s largest institutional investor, wielding significant influence over capital contributions ranging from hundreds of billions to trillions of won, as well as the selection and evaluation of asset managers. Amid growing controversy in the financial sector over the re-employment of former officials from economic and financial institutions—such as the Fair Trade Commission, the Financial Supervisory Service, and stock exchanges—in the private sector, observers point out that the re-employment of former National Pension Service employees at asset management firms is inevitably a sensitive issue requiring careful management of conflicts of interest.

In particular, following the recent Centerfield case, there are growing calls to scrutinize more closely all major investment decisions led by the Real Estate Investment Division over the past few years. Given the repeated instances of personal connections between former high-ranking officials and specific asset management firms, as well as allegations of external interference in personnel matters, there is a need to verify whether individual investment decisions were made in accordance with the fund’s profitability and principles. As an organization managing massive amounts of the public’s retirement funds, critics argue that decision-making processes and internal control systems must be transparently verified to ensure there is no lingering suspicion that specific personal networks or private relationships influenced investment decisions.