FAQ

Explain briefly about the history of mutual funds !

Mutual funds are discovered in the 19th century in America. They are roughly known as "funds for the same investment objectives". They are also called as Unit Trust in England which means “the units that you trust”. In other words, by investing in mutual funds investors will get a number of units which will be managed and entrusted to other parties. In Indonesia, this instrument was established in 1995, beginning with the launching of close-end mutual funds managed by PT BDNI Investment Fund, followed by another investment manager company in 1996.

What are Mutual Funds ?

Mutual fund is a form of collective investment where individuals and companies can easily and comfortably invest in stocks, bonds, or money market instruments. The concept is very simple! It is by pooling funds from the investors who have similar investment objectives into a “container”. Investment Manager will then manage the funds collected in these containers by investing into different kinds of stocks, bonds, and money market instruments; with the aim to help investors achieve their investment objectives.

What is an Investment Manager ?

Parties who have received permission from Bapepam-LK for conducting business activities that manage portfolio securities for the investors; or in other words, managing a collective investment portfolio to a group of investors.

How to select a good Investment Manager ?

Assessment is based on :

  1. Trustworthiness / Reputation
    This involves the reputation of the company itself or the group behind it.
  2. Experience
    This involves how long has the Investment Manager's Company been around managing mutual funds. Short-term performance cannot be used as a benchmark for future performance.
  3. Stability of Past Performance
    Do an observation / analysis to the performance of mutual funds which is managed by the Investment Manager since it first launched.

Explain how Mutual Funds work !

What are the advantages investing in Mutual Funds ?

  • Professional Management
    Your investment will be managed by professional Investement Manager who will conduct a comprehensive analysis in the proper selection of securities and have the best potential, in accordance with determined investment objectives.
  • Safety
    Each mutual fund is managed as an independent entity, with assets that are stored and maintained by third parties; the Custodian Bank. Custodian bank is responsible in keeping all the assets, including cash and securities, for the sake of mutual funds. Each mutual fund will then be audited twice a year by a public accountant.
  • Diversification of Portfolio to Minimize Risk
    Risks are easier to control when the investments are diversified. Therefore it is not advisable if you do only one security / investment instrument, as the value of your acquisition depends entirely on that instrument.
  • Mild Initial Investment
    To make an investment, one can start with only Rp500,000,- This opens up the possibility for anyone to make a diversified investment through mutual funds.
  • Liquidity
    You can access your money easily within a relatively short period of time. Mutual Funds are required to buy back your units when you have decided to withdraw your money. This privilege of investation is particularly special in Indonesia, where liquidity is not always available in stocks, bonds, and money market. All you need to do is make a call and provide written instructions by mail, facsimile or e-mail!

How many type of Mutual Funds ?

  • According to its Characters :
    1. Close-End Mutual Fund
      This type of Mutual Funds are traded like stocks, on the bourses. Investors who want to own these stocks have to buy from other investors. Investment Manager may sell them too, but not mandatory. Price of mutual funds are more determined by demand and supply; not due to its value of net assets.
    2. Open-End Mutual Fund
      This type of Mutual Funds give an opportunity for investors to directly buy/sell back their units. Most investors prefer this type of Mutual Fund as it is more liquid. Furthermore, its price per unit depends on the value of asset which support the units at that time.
  • According to its Investment Objectives :
    1. Money Market Fund
      This type of Mutual Funds invests mostly in money markets such SBI, certificate of deposit and time deposits which are issued by banks, commercial paper and other short-term investments.
    2. Fixed Income Fund
      This type of Mutual Funds invests mostly in bonds issued by companies which basically require capital (debt); private companies, state companies, local and regional governments, Indonesian government, and so forth.
    3. Equity Fund
      This type of Mutual Funds invests primarily in stocks such as; proof of ownership of companies that have ‘go-public’ or stocks that are traded in the capital market.
    4. Balanced Fund
      This type of Mutual Funds invests a balanced amount of money markets, bonds and stocks.

Any comparison of media performance / benchmark of Mutual Funds ?

  1. Money Market Fund :
    The average time deposit rate of 3 government banks & 3 private banks – for a 3-months period - after tax.
  2. Fixed Income Fund :
    The average time deposit rate of 3 government banks & 3 private banks for a 12-months period.
  3. Equity Fund :
    Composite Stock Price Index in Jakarta Stock Exchange.
  4. Balanced Fund :
    The three type of mutual funds above combined with an average of 1/3 each respectively.

What is ‘Unit’ ?

It is a form of measure that indicates the amount of participation in mutual funds.

What is Net Asset Value (NAV) ?

It is a reflection of the real value of the funds that the investors invested in a period of time. This is calculated by an independent party called the Custodian Bank.

What are the fees charged when investing in mutual funds ?

  1. SELLING FEE
    Fees that are charged to mutual fund whenever investors make an investment. The amount varied.
  2. REDEMPTION FEE
    Fees that are charged when investors withdraw their investment in a certain period of time. The amount varied.
  3. SWITCHING FEE
    Fees that are charged when investors shifted their investment into another type of mutual funds (done under the same Investment Manager). The amount varied.
  4. MANAGEMENT FEE, CUSTODIAN FEE

    5. These fees are borne by the fund.

What is the objective of investation in Mutual Funds ?

  1. Treat it as savings.
  2. Treat it as pension plan.
  3. Treat it as tuition plan (compare with insurance products).

What is the function of Custodian Bank ?

Based on the Collective Investment Contract :

  • Appointed with the approval of Bapepam-LK.
  • Keep-safe all the cash, securities and Mutual Funds.
  • Perform administrative activities for Mutual Funds portfolio.
  • Calculate NAV daily.

 

The presence of Custodian Bank will prevent any fraud and misconduct that put investors at disadvantages as all transactions are controlled and regulated by the Custodian Bank. Hence, the selection of Custodian Bank are done carefully and thoroughly.