Pension Fund Investment in Mutual Funds Posts Highest Growth

Pension fund’s investment in mutual fund grew 18.03 percent to Rp 8.2 trillion in June 2011 from Rp 6.95 trillion, according to data from Capital Market and Financial Institution Supervisory Board (Bapepam-LK). The growth was higher than stock investment at 8.29 percent and in state bonds investment at 2.06 percent.

In terms of amount, pension fund’s investment in mutual fund was lower than the stocks and state bonds, wherein stocks increased Rp 1.65 trillion to Rp 21.6 trillion from Rp 19.95 trillion in January and state bonds grew to Rp 30.63 trillion from Rp 30 trillion in the same month.

Mulabasa Hutabarat, Pension Fund Bureau Head of Bapepam-LK, said that both instruments can give higher return than other instruments, thus prompted higher investment growth.

Pension fund’s total investment increased 16.45 percent to Rp 125.77 trillion in June 2011 from Rp 108 trillion in December 2010 due to higher returns and customer investments.

Based on data from Bapepam-LK, pension fund industry lowered the investment in corporate bonds and sukuk by 0.2 percent to Rp 29.52 trillion from Rp 29.58 trillion in January. Investing pension funds in direct investment also fell 1.65 percent to Rp 3.62 trillion from Rp 3.68 trillion.

Torang M Napitulu, President Director of PT Pertamina Persero Pension Fund, said that the change to pension fund investment are very reasonable to obtain lucrative returns.

The company will reduce direct participation investment and will sell its own shares to its subsidiaries. The plan aims to focus on investing in stock market and money market.

A tighter regulation such as minimum capital and other provisions in the industry is another factor for the company to reduce its participation in direct investment.

Exploit Momentum

Hari Septanto, Risk Management Manager of Bank Rakyat Indonesia Pension Fund, said that the company changed its investment in mutual funds and stocks to 6.7 percent and 21.4 percent, respectively in the first semester of 2011 from 1.1 percent and 19 percent YOY.

The increase in stock investment was due to a rise in economic growth and increased level to investment grade that prompted capital inflow to Indonesia’s capital market. "A change in our investment grew our investment return by 3.8 percent to Rp 513.71 billion in the first semester of 2011," he said.

Good economic condition in the second half of 2011 prompted a change to Bank Rakyat Indonesia Pension Fund’s investment in stocks to 24.8 percent and mutual fund to 10.6 percent by year-end.

The managed fund grew 13.3 percent to Rp 8.99 trillion from Rp 7.93 trillion YOY. Non-investment assets also increased 28 percent to Rp 207.89 billion from Rp 162.37 billion.

Seno Utomo, Director of Wijaya Karya Pension Fund, said that the company will raise its stock investment from 6 percent in 2010 to 10 percent. The company estimated that the returns will surge 90.47 percent from Rp 8.4 billion to Rp 16 billion. "We will also increase the investment in mutual funds from 5 percent in 2010 to 10 percent to push a 128.6 percent surge from Rp 7 billion in 2010 to Rp 16 billion,” Seno said.

The rise in mutual funds and stock investment is due to the market estimates this year that Jakarta Composite Index will be go up. The expectations on the increase in Indonesia’s debt rating to investment grade this year also prompts foreign investors to invest in capital market, thus affects stock prices.