T. Hidayat

T. Hidayat Contributor Jakarta

The government law number 8/1995 on capital markets issued in 1995 caused the proliferation of mutual fund companies in the country. Within six months after the law came into effect, more than 20 such companies made public offerings that exceeded 12.5 billion units.

However, the party did not last long. Toward the end of 1997 the country was hit hard by the economic crisis, which dwindled the number of investors in this fledgling business.

Apart from decreasing the value of mutual funds products, the economic crisis also hurt prices of shares and bonds. The new mutual fund investors, partly due to lack of knowledge, panicked and quickly sold out their equities. Mutual funds were no longer attractive as, almost simultaneously, banks were offering sky- high interest rates of up to 70 percent annually for deposits. And that seemed the right place for almost everyone's money.

Although in the earlier days of growth, the mutual fund business was hit by the economic crisis, its development on the whole in later years, according to director of PT Schroder Investment Management Indonesia Michael T. Tjoajadi, was categorized as comparatively healthy due to its resilience. He admitted that most Indonesians still preferred to keep their savings in bank deposits, which is one of the hampering factors for the growth of mutual funds. In developed countries, he said, investments could be in various forms, including mutual funds, bonds, shares and so forth.

However, this attitude is understandable as bank deposits are guaranteed by the government, unlike investments in mutual funds.

The major players in this business soon realized that they had to actively communicate to the public and "educate" them on the benefits of investing in mutual funds. Hence, the massive influx of not only advertisements, but also benefit-related news in the media to focus on the uniqueness of such investments.

To invest, one does not have to wait until one has a lot of money. Just like Robert T. Kiyosaki wrote in his book Guide to Investing, a true investor does not wait until he is rich enough to make investments. Investments of small amounts, like in mutual funds, can start at any time. With only Rp 200,000 (about US$ 23) one can purchase an equity of a blue-chip or well-established mutual fund.

Today, various types of mutual funds are available on the market. For rather adventurous investors after large profits, stocks are suitable, while for the more moderate type there are combined mutual funds or those with fixed returns. The lowest risks are perhaps in the money market accounts.

"All kinds of investments, especially those that offer larger profits, are prone to risks," said Michael. Investments in mutual funds are indeed more profitable in comparison with the interest rates of bank deposits, but behind the opportunities for making more profits lie the equally possible risks, like the decrease of net value. Quite a number of mutual funds between 1998 and 2000 experienced this kind of slump in their net value.

The mutual funds specializing in money market, which, according to Michael, is a more secure form of investment comprising Bank Indonesia's certificates and the country's major banks' deposits. In view of the fact that mutual fund companies handle huge amounts compared with any individual's deposit, the rate of return is obviously much higher. Normally, this type of mutual fund is the closest alternative to keeping money in bank deposits.

Likewise, also preferred by most "cautious" investors are mutual funds that deal with bonds, which offer a return of 20 percent annually.

Choosing which mutual funds to invest in is certainly not easy. A few years ago, many people suffered losses in the billions of rupiah from investments considered to be healthy. However, especially since the end of 2001 or early 2002, things have changed for the better, as most mutual funds in the country have bounced back and provided returns that were much higher than the interest rates of Bank Indonesia's certificates or even the country's top bonds.

Apart from deciding on which mutual funds to invest in, another important factor is the role of the fund manager that one appoints to take care of one's investments. The track record and style of investing of a fund manager are among the prerequisites in selecting the right fund manager. Other features to be carefully noted are the ease of the registration process, the minimum amount to be invested, the amount of management fees and other related services provided by the fund manager.

One of the world's leading financial services company, Manulife, with 250 offices in 15 countries and over 30,000 employees worldwide, has even more to offer including via its operations in Indonesia.

Manulife Aset Manajemen Indonesia, a part of such a huge multinational financial services organization, has access to the best independent research information to provide sophisticated, customized investment solutions and superior investment performance to its clients in Indonesia.

Its mutual fund products, categorized as among those most sought after by investors and containing the most important qualities such as flexibility, convenience and, above all, transparency include: Phinisi Dana Saham (Equity Fund), Phinisi Dana Tetap Pemerintah (Government Bonds Fund), Phinisi Dana Campuran (Balance Fund), Phinisi Dana Kas (Money Market Fund), Dana Tetap Instan (Treasury Management Fund) and Manulife Pendapatan Bulanan (Monthly Income Fund).

Among the company's strengths is the team-based approach to asset management that incorporates, among other things, fundamental, quantitative and econometric models to structure composites that meet the portfolio's policies, objectives and risk profiles while aiming to match or even surpass the pre- established investment performance goals.

With currently about 15,000 investors and mutual fund assets under management standing at IDR 4.2 trillion -- both figures expected to grow by the end of the year -- Manulife Aset Manajemen Indonesia is one of the largest fund management company in the pure-breed fund category. Its reputation is further reinforced by ISO certification for high quality operations and strict documentation procedures.

With the wide-ranging mutual funds available in the country along with the enhanced services of related companies, most investors' headaches are hopefully gone in view of the currently more positive economic situation. So, turning to mutual funds as an investment strategy has become a more natural alternative.