Mutual Funds

Understanding Mutual Funds

Mutual Funds are an investment vehicle used to collect funds from the public, to be invested by the Fund Manager in the Portfolio Securities. Gain from the investment is in the form of capital appreciation over an investment period.

Benefits of Mutual Funds

Investing in Mutual Funds has several benefits, which makes it an attractive investment alternative, which are:
Managed by a professional Fund Manager
A Fund Manager who specializes in fund management makes the investment management of mutual funds. The role of a Fund Manager is crucial, as an investor, in general, has limited resources to do research, analyze stock prices, as well as access information to the capital market directly. A professional Fund Manager will manage the investment in accordance to the policy in the prospectus to achieve an optimal return.
Investment Diversification
Diversification or investment distribution aims to reduce risks. Funds placed in Mutual Funds will be invested in various types of securities; therefore, the risks are also diversified. In other words, the risks are not as high as if an investor purchases one or two securities directly.
Tax Benefit
The gain on investment obtained from the sale of mutual funds is not taxable. This is in accordance with the Law no. 36 Article 4(3)i on Income Tax issued in 2008.
High Liquidity
One of the benefits of investing in mutual funds is the liquidity, whereby investors can redeem the units they own according to the regulation in the prospectus. Fund Manager must buy back the units and repay up to maximum T+7 trading days under normal conditions according to the regulation in the prospectus.
Transparency of information
Fund Managers are required to provide information in the development of their investment on a regular basis, so that the Unit Holders are able to monitor their fund placement, performances and risks. Fund Managers must announce the Net Asset Value (NAV) every day in the newspaper and publish financial statements, prospectuses and monthly reports (Fund Fact Sheet).
Affordable Investment Amount
Investing in Mutual Funds does not need a large sum of funds. With and affordable amount, you are able to start investing early and obtain all the benefits mentioned above.

Types of Mutual Funds:
Money Market Funds
The Money Market invests 100% of its funds in money markets instruments, such as term deposits, SBI (Indonesian Treasury Bills), or short-term bonds (commercial papers issued by companies or government) which have maturity dates in less than one year.

Advantages:
Short-term investments that provide stable returns and preservation of principal / initial investment value.
Money Markets have slightly higher potential return than time deposits.
Money Markets are liquid investments and easily redeemed.
Free of subscription and redemption fee
The risk is relatively small compared to other types of Mutual Funds


Fixed Income Funds
A type of mutual fund that invests a minimum of 80% of its funds in bonds.

Advantages:
Suitable for medium-term investment objectives
Fixed Income funds are likely to pay higher returns than term deposits or money market investments.
Some fixed income funds have a profit sharing mechanism in the form of cash payment or unit addition, distributed to investors on a regular basis.


Balanced Funds
A type of mutual fund that invests in a flexible combination of money market, fixed income and equities.

Advantages:
Balanced Funds is suitable for medium to long-term investment objectives
Balanced Funds are likely to pay higher returns than fixed income investments.
Balanced Funds have the flexibility in asset allocation to produce advantages in any market condition.


Equity Funds
A mutual fund that invests principally (minimum of 80%) in stock instruments.

Advantages:
Equity Funds is suitable for long-term investment objectives.
It has the highest investment growth potential, in line with the growth of the Indonesian stock market.


Protected Funds
A type of mutual fund that invests primarily in bonds in such a way that it provides protection to the initial investment value at maturity.

Advantages:
Protected Funds provides 100% protection to the initial investment value, if it is held for the contractual term.
It has a potential return of the interest rate level of bonds portfolio.

The common risks of investing in the Mutual Fund:

Mutual Funds can provide benefits to investors if the securities portfolio that managed by Fund Managers is able to provide results as expected. However, if the securities portfolio declines in value, then the mutual funds can also result in a loss. Therefore, investors need to understand as well as consider the risks when investing in mutual funds. Types of risks in mutual funds are:
Market Risk
The risk that the investment value will decrease due to changes in market conditions (interest rates, inflation, financial crises, etc.);


Legal Risk
Risk of changes in regulations related to mutual funds;


Liquidity Risk
Risk that occurs when investors redeem their holdings simultaneously at the same time; and


Liquidation Risk
The risk that the mutual fund is closed and liquidated by the capital market authority / Bapepam-LK when the value of funds managed is less than the minimum requirement.


Disclaimer:

Mutual funds is a capital market product and is not a product of the Bank, therefore it is not guaranteed by the Bank and is not part of the government guarantee program or deposit insurance schemes.

The Bank, as a Mutual Fund Selling Agent, is not responsible for any claim and risk on the management of the mutual funds portfolio.

Investors must read the prospectus and understand the risks of mutual funds before making an investment decision




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