The number of mutual funds in Indonesia is on the rise, even though the volume of assets managed has shown less consistent in recent years.
The combined net asset value (NAV) of mutual funds rose to IDR 209.51 trillion as of June 27, 2014, up from IDR 192.54 trillion at the end of 2013, but down from the 2012 level, data from the Financial Services Authority (OJK) show.
Equity-based funds account for almost half of the market (IDR 90.16 trillion), followed by fixed-income funds (IDR 30.2 trillion) and multi-asset funds (IDR 18.34 trillion). Principal protected funds amounted to IDR 42.8 trillion, while foreign currency denominated funds are totaled IDR 16.1 trillion. Sharia-compliant funds increased to IDR 9.17 trillion as of 27th June 2014.
The market size of mutual fund industry in Indonesia remains small compared to that of other countries and the domestic banking sector. In fact, the entire financial sector is relatively small with 72% of GDP in 2013. This indicates that domestic financial industry has sufficient growth potential.
The vast majority of mutual fund investor is institutional client, while individual investors contribute only a small portion of funds. The total number of mutual fund investors is around 180,000, according to a figure reported by APRDI in March 2014. It is less than 0.1% of the country’s population.
The government and central bank are encouraging local investors to participate in equity and bond markets to increase the size and depth of the capital markets and reduce volatility from cross-border capital flows. They believe investing mutual funds should be the easiest way to increase the market share of local investors in domestic capital market.
Market penetration of mutual fund is also increasing by banks, the primary sales channel to retail clients, extend their branch networks outside Jakarta, where many customers have limited investment options.