‘Regional Relocation’ Behind KIC’s First-Ever Union Launch... Sovereign Wealth Fund Management Competitiveness Under Scrutiny [fn Market Watch]

[Financial News] Korea Investment Corporation (KIC), South Korea’s sovereign wealth fund, has drawn attention by launching its first labor union in the 21 years since its establishment. Discussions of the government’s second round of public institution relocations to regional areas were the direct trigger. With about 85% of its employees joining the union, internal concerns have surfaced over the impact a headquarters move could have on the fund’s ability to attract specialists and its investment competitiveness. As the government seeks to expand KIC’s strategic investment functions, relocating its operational base has emerged as a new variable.
According to investment banking (IB) industry sources on the 13th, the KIC labor union completed its registration on the 6th and issued its first official statement that day. It is the first union since the corporation was established in 2005. The union said a headquarters relocation should not be pursued unilaterally without sufficient impact analysis and consultation with employees.
The union’s launch is drawing attention because it raises questions about the operating foundations of a sovereign wealth fund, going beyond a simple demand for better working conditions. KIC is a specialized institution that invests national assets, including foreign exchange reserves, overseas. Its network of global asset managers and investment banks, and its ability to attract specialist talent, are considered key competitive strengths.
The issue is whether the government’s policy of developing the sovereign wealth fund is consistent with its plans for relocation to regional areas.
The government is in fact pursuing a plan to establish a strategic investment account at KIC to provide long-term capital to domestic strategic industries and expand co-investment with global investors. At the same time, the possibility of moving KIC’s headquarters has been raised under the second-round public institution relocation policy.
The union emphasized that major sovereign wealth funds such as Norway’s Norges Bank Investment Management (NBIM) and Singapore’s GIC are located in capital cities or financial centers. It argued that relocating a sovereign wealth fund that needs to benefit from Seoul’s financial agglomeration could disrupt its global investment network and its ability to attract talent.
The relocation of the National Pension Service’s Fund Management Headquarters to Jeonju was also cited. The union expressed concern that KIC could likewise face the risk of losing key investment personnel, noting that the retirement rate rose from 5.6% to 14.0% when the NPS fund management headquarters was relocated.
As an alternative to relocating to a regional area, the union proposed using KIC’s investment capabilities and global network to provide capital to regional strategic industries and promising companies. It also called for an objective impact assessment of any relocation and meaningful consultations among labor, management and the government.
Jang Ju-ho, the union’s inaugural chair, stressed, “The corporation’s responsibility to protect and grow the nation’s valuable assets is no different from the union’s responsibility to protect the lives of its members and their families,” adding, “We will unite our members and respond to one-sided sacrifices to the very end.”
IB industry sources are watching to see whether the union’s launch will broaden discussions about KIC’s relocation to regional areas beyond the simple reallocation of a public institution, to encompass the fund’s operational independence and its ability to compete for specialist talent. One IB industry source said, “Since neither whether KIC will relocate nor the destination has yet been decided, the government’s policy-making process going forward will be key. KIC, as a sovereign wealth fund, is at the top of the list of organizations that CEOs and owners of leading foreign financial institutions and private equity funds most want to meet. Given the future competitiveness and standing of sovereign wealth funds, it should first be a priority to examine the various concerns and potential effects of relocation to regional areas.” 
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