Danareksa launches open-end mutual funds

Danareksa launches open-end mutual funds

JAKARTA (JP): PT Danareksa Fund Management (DFM) launched
yesterday three packages of open-end mutual funds worth nearly Rp
1.5 trillion (US$640 million).

Company president Iwan Pontjowinoto said yesterday that the
company had collected a total of Rp 236 billion from sponsors and
expected to raise another Rp 1.2 trillion from institutional and
individual investors in the next 12 months.

He said that the funds, Indonesia's first ever open-end mutual
funds, are divided into three packages -- Melati Funds, Anggrek
Funds and Mawar Funds -- each with a nominal asset value of Rp
500 billion.

"The funds will respectively have 500 million shares, each
with a face value of Rp 1,000," he said at the launching of the
funds. "The funds will be sold to investors at their par value."

Iwan said that each package will have different investment
concentrations, with Melati focusing on bonds and money market
instruments, Anggrek on shares and debt instruments, and Mawar on
shares, debt and money market instruments.

"We hope the combination of the investment concentrations of
the three mutual funds will match investor demand," he said.

Danareksa Fund Management, a subsidiary of the state-owned PT
Danareksa Securities, is the first company to issue open-end
mutual funds in the country.

Unlike closed-end funds, open-end mutual funds are not listed
on the stock exchange.

Several other investment funds are expected to soon enter the
open-end mutual investment industry, which was opened earlier
this year following the enactment of the new capital market law.

PT Bahana TCW Investment Management and a number of banks,
including Bank BDNI, Amro Bank and Bank Bira, are still waiting
for licenses to set up similar mutual funds, according to the
Capital Market Supervisory Agency (Bapepam).

No guarantee

Iwan said that Danareksa Fund has set up different types of
mutual funds so that investors can choose the investment
instruments that suit their demands.

"Cautious investors, for example, might invest in less risky
Melati, which invests all of its portfolio in fixed-income
instruments," he said. "Long-term investors might choose the more
fluctuating Anggrek and Mawar funds."

He could not guarantee, however, that investors would receive
gains higher than those acquired from investments in time
deposits or bonds.

A mutual fund manager is not allowed, by law, to promise
investors a certain level of earnings from their mutual funds.

He said the Melati fund, which focuses its investment on bonds
and money market instruments, could theoretically give an annual
gain of 17.5 percent, a bit higher than the average 16 percent
interest rates offered by bank deposits.

The higher income is possible because unlike individuals or
ordinary companies, a mutual fund manager is exempted from paying
a 15 percent income tax on interest earnings obtained from
deposits or bonds.

Iwan said that investors will, therefore, be able to make a
profit on their mutual fund investments, even after redemption
fees and charges.

Securities analysts hailed the launching of the country's
first open-end mutual funds, saying that the new investments will
give investors more alternatives.

Adler Manurung, a capital market analyst, said the investment
instruments would benefit individual investors, especially those
who do not really understand about the mechanism of capital
market activities.

"If you lack stock trading skills, you'd better invest in the
mutual funds. It will be safer," he said. He warned, however,
that investors should be selective and invest only in mutual
funds managed by trustworthy fund managers.

Manurung said that the level of earnings will be more
determined by the capability of fund managers to manage their
investment portfolios.

Adriansyah Chaniago of PT BBS Securities shared Manurung's
views, saying that investors should first assess the financial
strength of the fund managers before joining their funds.

"We should be certain that the fund manager has the money when
investors redeem their shares," he said. "It is important because
most fund managers' funds have been invested in stocks, bonds or
other debt instruments."

Iwan said that Danareksa Fund has appointed Citibank as the
custodian of its three mutual funds and Merrill Lynch Asset
Management as its investment advisor.

Danareksa fund, which currently manages 16 series of semi
open-end mutual funds, with combined net total assets of around
Rp 307 billion, will set up sales promotion centers in important
city areas such as Pondok Indah and Mangga Dua.

Iwan said the company's semi-open-end instruments -- more
popularly called Sertifikat Danareksa -- would be gradually
repackaged into either Melati, Anggrek or Mawar funds.

The value of their assets in Danareksa certificates will be
increased by 8 percent if the certificates are converted into the
open-end instruments, he said.

The government has issued a number of incentives to boost the
mutual fund industry such as the exemption of income tax when
they are redeemed and on earnings acquired by fund managers from
bonds. Mutual fund sponsors are also allowed to invest more than
1 percent of the fund's total value, providing fund managers with
sufficient funds for initial investment portfolios.

Unlike sponsors, ordinary buyers, both foreign and domestic
investors, are only allowed to own up to 1 percent of the fund's
total assets. (hen)