Pension funds urged to invest in mutual funds<\/p>\n
JAKARTA (JP): The Minister of Finance has issued a new ruling
\nencouraging pension funds to invest in mutual funds to help build
\na strong domestic base for local stock markets.<\/p>\n
Finance ministerial decree No. 93\/KMK.017\/1997, dated February
\n28, stipulates pension funds can invest a portion of their funds
\nin mutual funds.<\/p>\n
The Ministry of Finance pension fund director, Sophar
\nLumbantoruan, said yesterday a pension fund could invest up to 10
\npercent of its investments in a mutual fund.<\/p>\n
\" They can invest all of their funds in 10 different mutual
\nfunds, if they wish,\" Sophar said.<\/p>\n
The ruling amends the previous decree which stipulated pension
\nfunds could put their money in time deposits, certificate of
\ndeposits, stocks, bonds, money market securities, equity
\nparticipation, land and buildings.<\/p>\n
So far the government has licensed 239 pension funds
\nestablished by companies for their employees and 21 other pension
\nfunds managed by banks or life insurance firms.<\/p>\n
The 239 pension funds managed Rp 20 trillion (US$8.3 billion)
\nas of the end of last year, of which Rp 14 trillion were invested
\nin financial instruments.<\/p>\n
The other 21 pension funds managed Rp 187 billion as of the
\nend of last year, of which Rp 183 billion were invested in
\nfinancial instruments.<\/p>\n
Sophar said 55 percent of pension fund investments were put in
\nbank deposits, while only 10 percent went into in stocks, 10
\npercent in bonds and 15 percent in property.<\/p>\n
The new ruling is expected to encourage pension funds to
\nindirectly enter the local stock exchanges through mutual funds.<\/p>\n
Capital Market Supervisory Agency data shows that since the
\npromulgation of the 1995 capital market law, 22 mutual funds have
\nbeen set up as of the end of last year. Four new mutual funds
\nwere established earlier this year.<\/p>\n
The value of the 22 funds' net assets is estimated at Rp 2.28
\ntrillion, of which 80 percent was invested in fixed income
\nsecurities and 20 percent in stocks.<\/p>\n
The larger number of mutual funds available are believed to be
\nable to attract new domestic retail investors to domestic stock
\nmarkets which are dominated by foreign investors.<\/p>\n
Foreign investors accounted for 60.18 percent of trade on the
\nJakarta Stock Exchange in 1996, down from 67.03 percent in 1995.<\/p>\n
The direct or indirect involvement of pension funds in
\ndomestic stock markets would inject fresh life to the markets.<\/p>\n
Sophar said pension funds would be one of the largest
\ninstitutional investors in stock markets, considering the amount
\nof money managed by pension funds had been increasing 30 percent
\na year.<\/p>\n
\"Pension funds have been growing quite rapidly and the growth
\npotential is still very large as some 80 percent of our workers
\nare not yet covered by pension benefits. That's the challenge,\"
\nSophar said.<\/p>\n
He said companies should set up pension funds for their
\nemployees. He encouraged workers who did not yet take part in any
\npension program to join a pension programs offered by financial
\ninstitutions.<\/p>\n
To encourage the development of pension funds, the government
\nhas provided them with tax facilities.<\/p>\n
Sophar told operators of pension funds not to abuse such
\nfacilities.<\/p>\n
He said a significant a portion of money invested in banks or
\nstock markets were made in the name of pension funds to benefit
\nfrom income tax exemption.<\/p>\n
\"But so far we have not yet found any tax evasion cases
\nengineered through pension funds,\" Sophar said.<\/p>\n
He warned that anyone trying to evade tax through pension
\nfunds faced five years jail and a fine of up to Rp 5 billion.
\n(rid)<\/p>",
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