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)