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Sunday, March 21, 2010

Consolidation of Investment Managers Approaching: Minimum Investment of Discretionary Fund to be Tightened

Monday, 15/03/2010 00:00 WIB
Irvin Avriano A.
Bisnis Indonesia

Consolidation of Investment Managers Approaching: Minimum Investment of Discretionary Fund to be Tightened

JAKARTA: Several investment managers will be shut down if the plan of applying a minimum investment requirement of IDR25 billion to bilateral discretionary fund is realized.

Director of PT First State Investments Indonesia Putut Endro Andanawarih viewed the potential shrinking number of investment managers was almost a sure bet and had to be responded as a challenge to the capital market players.

However, he informed, this would instead benefit both parties involved in the contract. "The tighter discretionary fund contracts will prevent anyone from feeling harmed in the future."

One investment manager estimated following the regulation and some other tighter regulations this year, the number of investment managers could shrink by 15-20 companies.

"If we want to be honest, it doesn't take huge capital to establish an investment manager as long as it has sufficient risk management and good integrity. I think around 15-25 investment managers will have to shut down operations following the regulation."

At the moment, the plan is being discussed. According to Head of the Investment Management Bureau at the Capital Market and Financial Institution Supervisory Agency Bapepam-LK Djoko Hendratto, who oversees the mutual fund and investment manager industries, the agency was still gathering inputs from market players before issuing the new policy, which will be inked in Regulation V.G.6 on Guide to Customer Fund Management by Investment Manager Based on Bilateral and Individual Discretionary Fund Agreement.

In the draft of the regulation, the capital market authorities suggests a minimum investment fund of IDR25 billion for discretionary fund. In addition, Bapepam-LK also suggests the need to have notary contract and custodian bank.

Can be harmful
Secretary of the Indonesian Employee and Retired Employee's Welfare Foundation Federation (Iyakkapi) Rubiyanto confirmed several foundations had been taking advantage of discretionary fund as investment product due to the fund's high profit profile.

However, he argued, the minimum fund requirement could be harmful if the amount was too big. "A minimum fund of IDR25 billion is too high since not many institutional investors have such a huge amount of fund. On the other hand, the regulation also protects investors and investment managers," Rubiyanto told Bisnis yesterday.

Iyakkapi is one of capital market investors associations using investment manager services to manage their investment portfolios.

In the meantime, the Indonesian Mutual Fund Managers Association (APRDI) responded by suggesting the minimum requirement be fixed at a more moderate level.

"We may suggest the minimum fund at IDR10 billion, although some prefer it at IDR1 billion or IDR5 billion. However, we think it is too small and is not different from limited equity mutual fund," said Chairperson of APRDI Abiprayadi Riyanto last week.

Shut down opportunities
At the recommendation of APRDI, Chairperson of Bapepam-LK Ahmad Fuad Rahmany stated, the agency would shut down opportunities to lower the minimum fund requirement to IDR5 billion since such a figure was too small and not safe for market players.

However, Fuad added, the possible schemes were IDR10 billion, IDR15 billion, or IDR20 billion.

"We want only big and risk-wise investors able to access discretionary funds. As to small investors, it will be better for them to invest their funds in mutual fund products," he said recently.

He continued the new regulation would lead to the consolidation of 99 investment managers currently operating. According to him, 99 managers were too high of a number and the authorities hoped there would be a stronger industry through investment manager mergers.

"It will be better to have a tight market that is able to protect the businesses and investors," asserted Fuad.

Co-Chairperson for Investment at the Indonesian Pension Funds Association (ADPI) Gatut Subadio viewed the regulation would improve investment process in the capital market.

In the meantime, President Director of the Jasa Marga Pension Fund Ali Gufron said the minimum investment requirement for discretionary fund should be fixed as minimum as possible.

"I think the minimum requirement fund should be fixed as minimum as possible, say IDR5 billion. IDR5 billion is a limit that still benefits investors."

Ali suggested additional requirements for discretionary fund management to reduce the risks of investors from losing money, such as in the case of Antaboga Delta Sekuritas or the case of hundreds of billion rupiahs' worth of loss suffered by Optima Kharya Capital. (Bisnis/iaa/08/faa)



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