Bapepam to get tough on mutual fund violators, set deadline

Bapepam to get tough on mutual fund violators, set deadline

The Jakarta Post, Jakarta

The Capital Market Supervisory Agency (Bapepam) has set April 1
as the deadline for mutual fund managers to comply with the
marked-to-market regulations applied earlier this year before it
imposes stricter sanctions.

"We will impose sanctions individually, not by company, on
fund managers who still have not followed the regulation as of
April 1," Bapepam head for investment management and research,
Freddy Saragih, said on Wednesday.

He added that the sanctions could range from a warning to
limitations or even prohibition of some individuals from being
involved in mutual fund transactions.

As previously reported, as of Jan. 1, Bapepam had made it
compulsory for mutual fund managers to base their traded mutual
funds' net asset value (NAV) on average market price (marked-to-
market) to improve transparency of the fund's value.

Mutual funds have grown by more than 10 times over the last
five years, in terms of units in trade from seven million units
in 1996 to 87 million, valued at Rp 103.96 trillion (US$10.92
billion), in 2004.

But a significant sell-off by investors caused the mutual
funds' NAV to drop from Rp 110.78 trillion last month to Rp
102.62 trillion this month, the agency reported.

Experts said aside from worries over market sentiment
indicators -- such as the surging world oil price and rupiah's
volatility -- the redemption was also caused by the
implementation of the marked-to-market regulation, which was not
uniform.

"If all fund managers comply with the regulation, there would
be a faster recovery period for mutual funds," head of Mandiri
Sekuritas' fixed income and economic research bureau Kahlil
Rowter said, adding that mutual fund investors did sold because
they suddenly saw the risk of investing through such instruments.

Indonesian money market investors needed to have a shift of
mindset, he said.

"People are investing in mutual funds not because they merely
seek to invest, but because they are being lured by a higher
yield," Kahlil said, adding that fund managers should better
explain the risks faced by investors.

Responding to such investment behavior, Mandiri Investasi, a
subsidiary of the country's largest lender Bank Mandiri, launched
a new mutual fund product with a lower risk, in cooperation with
three foreign banks.

Mandiri Investasi signed an agreement on the product launching
with the Netherlands' ABN AMRO Bank, Australia's Commonwealth
Bank and Britain's StandardChartered Bank.

The new product, Mandiri Pasar Uang, is supported by
underlying assets comprised of short-term money market investment
instruments like central bank promissory notes (SBI) and time
deposits.

"Short term investment trends favor the money market over
other instruments because they have lower risks, better liquidity
and no penalty on redemption," Mandiri Investasi president
director Abiprayadi Riyanto said.

He added that the yield from the mutual fund would range
between 6 percent and 6.5 percent, or even higher depending on
market developments.

Mandiri Investasi currently manages total assets of Rp 19
trillion with more than 90 percent of it in the form of fixed-
income mutual funds. The company expects to reap Rp 1 trillion
from the new product over the next six months. (003)