Equity funds seen outperforming other mutual funds’ returns in 2012

Equity funds seen outperforming other mutual funds’ returns in
2012

Esther Samboh, The Jakarta Post, Jakarta | Tue, 01/24/2012 9:54 PM

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“High risk, high gain” may be an apt description of mutual fund investment this year as those with larger stock portfolios appear likely to post the highest returns, buoyed by positive sentiments toward the country’s economic resilience and its impact on the stock market.

Equity funds, which are considered to be riskier than the other types of mutual funds, are expected to gain 12 to 15 percent in 2012, versus an 0.8-percent loss booked last year, said Edbert Suryajaya, an analyst at capital market research company PT Infovesta Utama.

In 2011, only 20 of 64 equity funds posted higher annual returns than the index gauge, with Makinta Mantap’s 23.93 percent gain topping the chart, followed by Millennium Equity’s 10.02 percent and Panin Dana Maksima’s 9.7 percent returns.

The balanced mutual funds, which are invested in both stocks and fixed income instruments like time deposits, government and corporate bonds, performed weaker last year, with average annual return of 0.94 percent. Gains ranged from the highest 19.98 percent managed by Sucorinvest Flexi Fund to Valbury Inklusi’s 24.39 percent loss.

Fixed income funds, which have the lowest investment risk, shined in 2011 with average annual returns of 11.11 percent, with BNP Paribas Prima II leading gains at 23.44 percent, followed by Panin Gebyar Indonesia II’s 19.28 percent and GMT Dana Obligasi Plus’ 19.1 percent returns.

“Investors have become more sophisticated and educated. Previously, when the market went down, investors redeemed their mutual funds. Now, they buy instead, seeking for gains in the next few years,” said Abiprayadi Riyanto, head of the Indonesian Association of Mutual Fund Managers (APRDI).

The benchmark Jakarta Composite Index (JCI) saw sell-offs and heavy volatility last year as international funds avoided risky investments and shifted to safer instruments as threats of global economic slowdown loomed.

The index gauge dipped 28.27 percent within two months of setting a record high 4,193 in August, but ended 2011 in the black with a slight 3.2 percent annual gain to 3,822.

This year, the stock index is expected to perform better, with analysts predicting gains as much as 30.82 percent, bring the JCI to 5,000, thanks to expectations that the recent upgrades in investment status will widen the country’s investor base across the board.

“Equity funds will remain a favorite choice, because the current 6 percent benchmark interest rate is too low for our investors who, in the past, enjoyed 7 to 8 percent returns. They might not be attracted to buy products with low yields,” Abiprayandi said. Yields move in the opposite direction to prices.

The government bond index jumped 14.32 percent to 5,352.38 and the corporate bond index gained 10.38 percent to 1,963.35 in December 2011, Infovesta data shows. Fixed income funds will continue posting gains this year, but lower than last year, analysts said.

“The fixed income funds have already reached rapid growth in 2011. They will post lower gains at about 9 percent in 2012,” PT Samuel Aset Manajemen president director Agus B. Yanuar said.

Mutual funds pool money from many investors, from individuals to institutions, and the funds’ managers will buy stocks, bonds, short-term money market instruments, and other securities, depending on risk profiles of the investors.

There are currently 646 mutual fund products to choose, in which 463,327 investors invest their money totaling in Rp 168.24 trillion (US$18.1 billion) assets under management, according to data from the mutual fund managers’ association.

The association expected a 15 to 17 percent increase in assets under management this year, but if the eurozone debt crisis worsens, the growth may slow to less than10 percent from 12.84 percent in 2011.

The rapid economic growth of more than 6 percent, combined with factors such as the domestic consumption-reliant economy, a growing middle class, and the government’s commitment to solve infrastructure bottlenecks comprised a good profile for investors to pump their money into Indonesia, PT Trimegah Asset Managemeent president director Denny Thaher said.

“We are optimistic on Indonesia’s market,” Denny said. “Mutual funds depend on investors’ risk profile and investment purposes. The equity funds are long-term investment of about 10 to 20 years in which Indonesia has a good profile.” (rcf)

 

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