Too Many Players, Mutual Fund Competition in Indonesia Unhealthy - Babel Insight
JAKARTA, Investortrust.id - The number of investment management (MI) companies in Indonesia is deemed too high, triggering unhealthy competition.
Moreover, with so many players, it is difficult to expect the emergence of companies with large-scale businesses.
Currently in Indonesia, there are 95 active MIs managing nearly 4,000 mutual fund products, ranging from equity funds, fixed income funds, exchange-traded funds (ETFs), mixed funds, money market funds, global funds, protected funds, index funds, to sukuk-based funds.
While Indonesia has 95 MI companies, this differs from India. In the Bollywood homeland, there are only 30 MIs, despite a population of 1.43 billion people. Meanwhile, Indonesia’s population is around 278 million people.
“As a result, there are many MIs, but their business scale is not large,” said President Director of PT Principal Asset Management, Naresh Krishnan, during a Panel Discussion themed “Challenges of Mutual Fund Investment in the Political Year,” held by Investortrust on Monday (18/9/2023).
According to Naresh, with too many players, the industry lacks strong bargaining power. He compared it to Malaysia and Thailand, which have bargaining strength. The same applies to India. “In India, the population is five times larger, with only 30 companies in consolidation. But their businesses are large-scale,” he stated.
The large number of MIs will lead to market scrambling. Especially in the discretionary fund market or fund management contracts (KPD). Because the market is limited, there could be aggressive fee offers, which ultimately damage the industry as a whole.
Besides that, to develop MIs, Naresh said, it is necessary to build business scale to offer the right products without errors. It requires bringing in best practices to see how to provide different products. “If the products are just the same and unappealing, customers get bored,” said Naresh.
Literacy and Socialisation
To prevent the public from falling into bogus investments or speculation, MIs view that investment literacy and socialisation efforts need to be intensified among the public, including millennials and Gen Z.
They need to understand the products they will enter and know the risks, not just listening to promises of profits.
The surge in crypto trading over the past two years is an interesting phenomenon among the millennial population. The development of speculative trading.
According to Naresh, it is very important to educate the public. He invited MIs to devote more time to reaching a wider population. Introducing new millennial generations as the main product.
What should MIs do to encourage Gen Z to invest?
Naresh provided an overview, one future direction for the life insurance industry is their focus on solutions. How to achieve life goals. “One of the main things we want to focus on is… how we can help all millennial generations. How they can save routinely,” he said.
So, he said, one important thing across markets is routine savings programmes. Able to save for the long term. Even if it yields 2% profit, it is better over 30-40 years.
It is necessary to help the public learn and find solutions for their lives, and that will be a very important transition in this industry.
Another interesting point, said Naresh, is distribution infrastructure. It is necessary to build distribution infrastructure so that it can reach 200 million people in the next 5-10 years.