Indonesia’s sustainable economic growth is offering ample opportunities through various financial instruments, in which mutual funds have become a promising investment destination.
There is an increase in domestic consumption in Indonesia due to the country’s healthier economy. The 6.1 percent economic growth led total Gross Domestic Product (GDP) to reach Rp 6,422.9 trillion (US$ 751.47 billion) in 2010, according to Central Statistics Agency.
With the government projecting Indonesia’s economy to grow at the level of 6.5 percent by the end of 2011, a number of international rating agencies have upgraded Indonesia’s investment grade. By the same token, banks operated in Indonesia have taken advantage of this condition which is conducive to the country’s investment climate.
Banks are now outdoing each other offering their investment products. One of the attractive investment instruments available and has been booming in the financial market is mutual funds.
Added Value
A mutual fund is an asset class where funds invested by many investors are pooled to buy stocks, bonds, securities and other money market instruments. There are various product categories of mutual fund, such as fixed income, money market, equity fund and balanced fund (combination of fixed income and equity fund).
There are many variants under each category. For example, there are short and long duration fund under the category of fixed income. Money market, which is considered as the safest way to park your money, consists of short-term debt instruments such as treasury bills; while equity fund, classified as ‘high risk, high yield’ has variants such as sector fund and index fund.
“Mutual fund product range offered by a bank or asset management company is usually comparable from one to another, but the difference often lies in the services and how the products are tailored to meet the needs of clients,” Ka Jit, Wealth Management and Premier Banking Division Head at Bank OCBC NISP, explains.
In offering its mutual fund products, Bank OCBC NISP has endeavored to be different by offering added value to its clients. “The added value is the enhancement of product knowledge that leads to financial solutions for the clients. Our added value includes facilitating our clients with fund managers who help to analyze their portfolio, risk appetite and objective,” he adds.
Ka Jit also emphasizes the importance of building a solid relationship with clients. To facilitate service excellence at best, Bank OCBC NISP is always geared toward helping its clients choose the right mutual fund product.
“We want to make sure that our clients understand current market view and their investment time frame. So, we educate them to allocate their funds into a set of portfolio in order to achieve their financial goal. Once we have assessed their risk appetite, we recommend product that fits their needs,” Ka Jit explains.
For instance, depending on current market view, clients with high-risk appetite should buy equity fund. Meanwhile, managed fund or money market is likely to fit those who are not risk taker, he adds. “Or you can buy our investment linked product, a combination of insurance and mutual. We partner with Great Eastern Life, a Singapore based insurance company, in providing our insurance products.”
Bank OCBC NISP offers 19 types of mutual funds through the bank’s 408 branches across the archipelago. In selling the products, the bank has distribution agreement with three asset management companies, which are NISP Sekuritas, Schroeder and BNP Paribas.
Huge Potential
The growing middle class in Indonesia is the drive that will boost the country’s financial sector and capital market.
More and more people now have bank account. Based on the recent data from Bank Indonesia, there are 80 million people are bankable. The number is significant for banks operating in Indonesia to build a lucrative proposition.
“Nevertheless, there are only approximately 400 thousand individuals who have mutual fund account nationwide. Looking at the country’s population of around 240 million, it means that there’s less than 1 percent of the population have mutual fund account. In countries like the US and Singapore, the percentage can be as high as 50 to 60 percent. So, the outlook for investment products in this country is indeed promising, “ Ka Jit remarks.
Published in HighEnd Magazine, September 2011.
