South Korea’s National Pension Service (NPS), which is under the country prosecutor’s investigations over alleged negligence of duty for its decision to approve Samsung Group’s merger of two affiliates last year, is in limbo, unable to set up next year’s investment plan for the world’s third largest pension fund that manages assets worth 545 trillion won ($452.35 billion).

According to NPS on Tuesday, the fund management committee, which is the highest governing body of the National Pension Service Investment Management, has indefinitely postponed its year-end meeting that was supposed to be convened last week to establish its investment plans for the upcoming year and project market conditions by each asset group. Based on investment plans set up at the year-end meeting, funds are managed either directly or indirectly after allocating investment share and deciding on the period.

Such a delay follows after a series of the country’s prosecutorial and parliamentary probes have been launched into the allegation that NPS approved the $8 billion merger of Samsung C&T Corp. and Cheil Industries Inc. of Samsung Group under certain political pressure, not for the benefit of shareholders.

Last week, a special prosecutor team formed to investigate the country’s unprecedented influence-peddling scandal involving President Park Geun-hye and her close friend Choi Soon-sil raided the NPS offices upon suspicion that the presidential office influenced the country’s largest institutional investor to agree to the merger in return for receiving generous illicit funds for non-profit foundations of Choi. State prosecutors separately confiscated documents and computer files from NPS offices late November over the same suspicion. NPS is a major shareholder of both Samsung units.

An unnamed NPS official said investment plans by major asset groups should have been set up earlier this month, but with ongoing prosecutorial and parliamentary investigations, all of NPS Investment Management business has been on hold.

Market observers also raised concerns that if NPS is charged with negligence of duty for its investment decisions made following the capital law, active fund management by not only NPS but also other institutional investors would be hindered. That would lead institutional investors managing funds in Korea to hesitate to make investment decisions due to worries that they could be accused of breach of trust for a fall in stock price or yields while managing funds.

NPS former Chairman Jun Kwang-woo also noted that the most important role of National Pension Service Investment Management is to make aggressive investment based on expertise to maximize returns. If fund managers’ hands are tied due to too much responsibility put on them for legitimate investment decisions, it would only end up taking a toll on people relying on the NPS for the last bastion for their years after retirement.

By Song Sung-hoon and Choi Jae-won

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