[Edaily Marketin JI YEONG-EUI Reporter] Major domestic institutional investors managing over 512 trillion won in assets are in an uproar over the issue of relocation to regional areas. Ahead of the government’s second phase of relocating public institutions to regional areas, there is growing concern that major mutual aid associations and the Korea Investment Corporation (KIC) may be included in the relocation plan. Industry insiders are questioning the practical benefits of moving financial institutions—which compete in global investment markets—to regional areas, regardless of the policy’s stated goal of balanced regional development. They point out that a relocation that fails to fully consider the unique nature of financial institutions could actually weaken their investment competitiveness.

Big Players Managing 512 Trillion… Why They Are Opposing the Relocation to the Provinces

According to the investment banking (IB) industry on the 6th, the Mutual Aid Association Labor Union Council and the KIC Labor Union met with Park Chan-gu, Seoul’s Deputy Mayor for Political Affairs, on the 4th to convey their concerns that

relocation to the provinces

would weaken financial competitiveness. Although the government has not yet finalized the list of institutions to be relocated, major investment institutions have begun to voice their opposition proactively. The Mutual Aid Association Labor Union Council is a consultative body comprising labor unions from eight major mutual aid associations, including those for school staff, administrative personnel, military personnel, police officers, science and technology professionals, construction workers, local government finance, and firefighters.

As of the end of last year, the eight mutual aid associations held approximately 179 trillion won in assets, while KIC, the national wealth fund, managed approximately 333 trillion won in assets. Combined, this exceeds 512 trillion won. They are major players in the capital markets, investing in a wide range of assets, including domestic and international stocks and bonds, as well as private equity funds (PEFs), real estate, and infrastructure.

Concerns that competitiveness will weaken due to the relocation to the provinces stem from these institutions’ investment methods. Alternative investments do not involve simply placing orders on an exchange, as with stocks. They involve a complex process of reviewing investment opportunities proposed by overseas asset managers or investment banks, analyzing risk factors with legal and accounting experts, and negotiating contract terms. This is why the investment network in Seoul—where financial companies and relevant professionals are concentrated—is so crucial.

In fact, major mutual aid associations allocate 60–70% of their total assets under management to alternative investments. Labor unions believe that if the relocation to the provinces reduces contact with overseas asset managers, it could hinder the process of identifying new investment opportunities and closing deals.

Is moving the office enough? … “Please weigh the actual benefits of relocating financial institutions”

It has been pointed out that the bigger issue lies in the fact that the competitiveness of financial institutions is not determined solely by the size of their assets under management. This is because a professional workforce with extensive investment experience, long-standing cooperative relationships with overseas financial firms, and the ability to secure investment opportunities in a timely manner are all critical competitive advantages.

The potential loss of top talent due to relocation to regional areas and the difficulty of recruiting new staff are also key considerations. Investment professionals compete in the same labor market as private asset management firms and securities companies. Securing such talent in regions far from Seoul’s financial hub could entail additional costs regarding compensation and working conditions.

This is also the context behind recent calls from financial authorities and the ruling party—regarding the relocation of the Korea Development Bank to Busan—to emphasize the clustering effects of financial institutions. The argument is that policymakers must take into account the competitive advantages gained when financial institutions are concentrated in one location.

Of course, there are valid reasons behind the policy goal of revitalizing regional economies by relocating public institutions to the provinces. However, there is a growing consensus that, in the case of financial institutions, we must carefully assess the extent to which simply relocating a headquarters can actually benefit the local economy. In particular, critics point out that we must consider not only the economic revitalization effects resulting from the relocation but also the costs of maintaining existing investment networks and the challenges of securing specialized talent. This is because relocating an institution’s headquarters and establishing a financial industry in a region are two distinct issues.

The KIC labor union, for instance, has proposed leveraging the institution’s existing global investment network to channel foreign capital into regional investment projects, rather than relocating to a provincial area. The idea is that there is a need to explore ways to contribute to the local economy without physically relocating the financial institution.

An official from a mutual aid association pointed out, “Since relocating to Jeonju, the National Pension Service has been facing difficulties in securing specialized personnel and maintaining working conditions due to repeated staff turnover,” adding, “Wouldn’t the same difficulties inevitably recur if investment institutions performing similar tasks were to relocate to regional areas?”