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)