Pension funds should shift from deposits<\/p>\n
The Jakarta Post, Jakarta<\/p>\n
In the chase for higher returns, pension funds have shifted their
\ninvestments from bank deposits to riskier portfolios, such as
\nbonds and equities, according to the Indonesian Association of
\nPension Funds (APDI).<\/p>\n
An expert advisor to APDI, Satino, said on Tuesday that
\npension funds, traditionally considered conservative investors
\nwith a total portfolio of Rp 47 trillion (US$4.87 billion), had
\nstarted shifting their investments in 2002.<\/p>\n
\"Interest rates on bank deposits have become too small and
\npension funds are therefore forced to switch to other instruments
\nto attain their investment goals,\" said Satino, who served as the
\nassociation's chairman until last month.<\/p>\n
Data collected by APDI showed that the proportion of funds
\ninvested in bank deposits decreased from 56.5 percent in 2003 to
\n31 percent in 2004 and was projected to decrease even further to
\n20 percent this year.<\/p>\n
Most pension funds have moved their portfolios into corporate-
\nand government-issued bonds, which increased from 26.5 percent of
\nthe investments in 2003 to 48 percent in 2004 and is projected to
\nincrease further to 59 percent this year.<\/p>\n
Equity and mutual fund investments increased by 90 percent
\nfrom Rp 3.3 trillion in 2003 to Rp 6.3 trillion in 2004, and is
\nexpected to reach Rp 8.9 trillion this year.<\/p>\n
Satino said ideally pension funds should allocate only 10
\npercent of their portfolio in bank deposits, 70 percent in
\ncorporate and government bonds and the remaining 20 percent in
\nmore volatile investment instruments, such as equities, mutual
\nfunds and property.<\/p>\n
Eko Pratomo, president director of Fortis Investments, which
\nmanages Rp 3 trillion in assets, said that pension funds should
\ndiversify their portfolios even further, especially into
\nequities.<\/p>\n
He said the stock market was now less volatile compared to
\nprevious years, making risks more manageable and equity
\ninvestment safer.<\/p>\n
\"In 1999, volatility reached 47 percent, now it is down to 23
\npercent,\" he said.<\/p>\n
Stock volatility is a measure of fluctuations in a share's
\nprice within a certain period of time. A more volatile stock has
\nrapid up-and-down movements in its price, while a less volatile
\nequity has more price stability.<\/p>\n
\"Although the situation has changed, the majority of pension
\nfunds are still utilizing short-term instruments such as time
\ndeposits as they still considered the stock market has tremendous
\nrisks,\" Eko said.<\/p>\n
\"The stock market has become liquid and stable enough for
\npension funds to invest in. It's a way for pension funds to
\ndiversify themselves by taking calculated risks,\" Satino said.<\/p>\n
He said that about 75 percent of pension funds managed their
\nown stock portfolios, which were heavily invested in blue-chip
\nshares in the banking, telecommunications and consumer goods
\nsectors, while the remaining 25 percent put their money in mutual
\nfunds controlled by outside investment managers. (002)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/pension-funds-should-shift-from-deposits-1447893297",
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"sponsor_url": "https:\/\/okusiassociates.com"
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