South Korea’s National Pension Service (NPS) has withdrawn 500 billion won ($341 million) from a domestic equity mandate managed by Mirae Asset Global Investments following a recent change in the mandate’s lead manager.
The manager in charge of the NPS mandate at Mirae Asset recently changed from former president Son Dong-sik to Kim Jae-hyun, head of Equity Management Division 1, according to people familiar with the matter on March 20. Under NPS guidelines, 25% of entrusted assets must be redeemed when a mandate’s lead manager is replaced. Son stepped down from fund management in 2023 and transitioned to an advisory role earlier this year.
Mirae Asset had the option of retaining the mandate by promising to outperform the previous manager’s returns, but the company opted to comply with the standard 25% redemption policy. If the new manager fails to meet the promised returns, Mirae Asset would have to redeem 1 trillion won, double the 500 billion won originally entrusted.
Following the change in the manager responsible for the NPS mandate, the size of the NPS domestic equity mandate managed by Mirae Asset decreased from 2 trillion won to 1.5 trillion won.
NPS had offered an alternative during discussions. Rather than withdrawing the funds immediately, the new manager could manage the fund for one year. If the fund’s performance over that period exceeded the average return achieved by his predecessor, Son, over the past three years, the NPS would not withdraw 500 billion won from the mandate. However, if the performance fell short of the goal, the withdrawal rate would rise to 50% instead of 25%.
While asset managers generally prefer to retain as much entrusted capital as possible, Mirae Asset opted for the safer path of returning 25% as the risks of taking the bet were too high. Son had an exceptionally strong track record in the past two to three years managing the NPS mandate, setting a high benchmark for his successor. Domestic stock market conditions were also not favorable enough for higher returns.
Son, one of the founding members of the Mirae Asset Group, played a key role in expanding the NPS’s entrusted assets from 300 billion won to 2 trillion won during his career, driven by his outstanding investment performance. He also managed Korea’s first mutual fund, the Park Hyun-joo Fund, and held key positions including head of equity, chief investment officer, vice president, and became head of equity management in 2012.
Kim Jae-hyun, his successor, is a Seoul National University graduate who joined Mirae Asset in 2010. He was named “Fund Manager of the Year” in 2018. He has worked closely with Son over the years, particularly in managing healthcare and retirement pension funds. According to a source in the investment industry, Kim “has a reputation for identifying growth stocks.”
